Paytm karo or think twice: From 164% surge to 9% H1CY25 slide, will it be a comeback story in H2?

Time of India

02-07-2025

One 97 Communications' stellar run of 2024 is hit by H1CY25 wall with
Paytm
shares falling 9% this year so far after a 164% rally from the lows of Rs 403. With regulatory challenges likely behind, the stock offers its share of opportunities and challenges, opine experts.
The stock is currently down 12% from its 52-week high of Rs 1,062.95 and offers opportunities to investors to make a move.
Vinit Bolinjkar, Head of Research at
Ventura
has recommended a 'Buy' on the counter for long-term gains. With one of the largest merchant base, Paytm is effectively leveraging its financial services vertical, he said. Moreover, robust device deployments and a scalable technology infrastructure, is making Paytm a preferred payment partner for merchants. This analyst sees the company regaining momentum further in its Monthly Transacting User (MTU) base, which could drive growth in GMV and revenue.
Brokerage firm
Motilal Oswal Financial Services
(MOFSL) has raised the price target to Rs 1,000 notwithstanding a 'Neutral' stance on the counter.
Technically, the stock remains set to reclaim levels of Rs 980, said Nilesh Jain, Head Vice President, Equity Research Technical and Derivatives at Centrum Broking. The stock is gradually moving higher and can be 'Added' in multiple tranches or be bought on declines, he opined.
Its underperformance is despite an 8% YTD rise in
Nifty
. The headline index is nearly 3% lower from its all-time high of 26,277.35.
What's ailing bulls?
The fintech company founded by Chairman and CEO
Vijay Shekhar Sharma
had reported a consolidated net loss of Rs 540 crore in Q4FY25 versus Rs 550 crore reported in the year ago period. While the loss was attributable to the owners of the parent, it included exceptional items. Excluding the exceptional items, the net loss stood at Rs 23 crore in the quarter under review. The exceptional items for Q4 FY25 stood at Rs 522 crore which includes Rs 492 crore charge towards acceleration of ESOP expense and Rs 30 crore towards other impairments.
Bolinjkar attributes the price sluggishness to the slower-than-expected recovery in MTUs during Q4FY25, which stood at 72 million witnessing a decline from 100 million in Q3FY24 to 70 million in Q3FY25.
"This was further compounded by a significant reduction in UPI incentives for FY25, driven by a shift in government funding priorities and the transition to a more market-driven pricing model for digital payments. Additionally, uncertainties surrounding the MDR issue negatively impacted overall market sentiment, contributing to the decline in stock price," he added.
Paytm shares have had their snakes & ladder moments since its listing in November 2021. The stock was listed at a 9% discount over the issue price of Rs 2,150. On Tuesday, the stock finished at Rs 930, down 52% from the listing price of Rs 1,950.
The Reserve Bank of India's (
RBI
) tightening screws on
low-ticket lending
in 2023 followed by restrictions on
Paytm Payments Bank (PPBL)
in January 2024 were big setbacks.
5 triggers for Paytm shares
1) Strong merchant ecosystem expansion
Paytm's merchant base grew 8% YoY to 44 million in Q4FY25, with device deployments up 16% YoY to 12.4 million. This expanding ecosystem drives recurring transaction volumes and deeper engagement, positioning Paytm for sustained GMV and revenue growth.
2) Robust GMV and disbursement growth outlook
GMV is projected to grow at a 23% CAGR over FY25-28E, while disbursement volumes (loans) are estimated to accelerate at 35% CAGR. This indicates Paytm's payments and lending businesses are both scaling rapidly, fueling overall revenue momentum, MPFSL said in a note.
3) Financial services revenue, a key driver
The financial services segment (including merchant and consumer loans) is expected to grow revenue at a 26% CAGR, increasing its contribution to Paytm's total revenue by over 250 basis points to 27% by FY28E, said this brokerage. This shift towards higher-margin financial services will enhance profitability.
Revenue growth is likely to accelerate through cross-selling financial products, particularly short-term and low-ticket size loans, to existing MTUs and merchants, Bolinjkar of Ventura said.
4) Contribution margin expansion
Through diversified revenue streams and disciplined cost control — including rationalized marketing expenses and AI-led efficiencies — contribution margins are expected to rise steadily, reaching 58% by FY28E, laying a clear path toward sustainable EBITDA profitability.
5) Clear path to profitability & earnings inflection
Paytm is on track for EBITDA breakeven by FY26E. Adjusted EBITDA is expected to swing positive in FY26 and improve sharply thereafter, with estimated PAT reaching Rs 1,620 crore by FY28E, this brokerage said. This inflection supports investor confidence in a profitable growth trajectory.
6) MTU recovery
Ventura's Bolinjkar anticipates a swift recovery in the MTU base following the resumption of onboarding new UPI customers after NPCI's approval in October 2024. The recovery took 3-4 months of H2FY25 to regain customer confidence, with FY26 expected to see a rebound in the MTU base, he added.
Why think before 'Paytm Karo'
MOFSL notes headwinds in the form of the fast-evolving digital payment industry, a decline in UPI market share and regulatory risks like the recent government disapproval of MDR on UPI transactions.
(
Disclaimer
: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)