Paytm to enter league of large profitable fintechs in four quarters, says Jefferies; expects 37% upside
One 97 Communications, the parent company of Paytm, with a ‘Buy’ rating and a target price of ₹1,300 per share, implying an upside of over 37% from Wednesday’s closing price. India's leading payments player, Paytm has accelerated monetization of its large ecosystem with ramp-up of credit business.
Continued momentum in credit originations and margin expansion in payments will upfront profitability ahead of market expectation, Jefferies said. “In next 4 quarters, Paytm will turn profitable and be amongst the few large profitable fintechs globally that enjoy strong growth (>30%), double-digit EBITDA margins and stable profitability.
However, its valuations at 3.6x FY25 EV/revenue remain at a 40% discount to this group," Jefferies said. Also Read: Bajaj Auto share price rallies 4% to hit 52-week high after strong Q2 results; Should you buy? With just 5% user penetration, Paytm’s loan disbursals have surged 10x to over $8 billion.
In payments, revenues expanded around 2.5x with ramp-up in merchant subscription business and margins jumped 20pp, led by industry tailwinds and management shedding unprofitable lines. (Exciting news! Mint is now on WhatsApp Channels Subscribe today by clicking the link and stay updated with the latest financial insights! Click here!) In 2 years, Paytm's revenues have jumped 3x, gross margins surged to 54% (from 13%) and placed the company on a path to profitability, according to Jefferies.
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