JM Financial expresses confidence in Paytm, maintains a 'buy' rating with a target price of ₹1,470
Paytm: JM Financial has expressed confidence in Paytm, setting a target price of ₹1,470 and maintaining a 'buy' rating. The report stated that Paytm's revenue grew 7% to ₹20.6 billion, while EBITDA doubled to ₹1.4 billion. AI-based innovation, robust financial services, and postpaid solutions have fueled the company's growth. The brokerage projects a 16% growth outlook in the future.
Paytm: Brokerage firm JM Financial has maintained its confidence in Paytm, the leading online digital payments company. The brokerage firm has maintained a 'buy' rating on Paytm with a target price of ₹1,470. In its November 5 report, the brokerage firm stated that Paytm once again outperformed expectations, with revenue growing 7% quarter-over-quarter to ₹20.6 billion. According to JM Financial, the company's contribution margin remained stable at 59%, in line with management targets. The report stated that Paytm's EBITDA nearly doubled to ₹1.4 billion due to improved payment processing margins and efficiencies in indirect expenses.
Potential for 16% Upside
JM Financial stated in its report that the company's operating performance continues to be strong and that it has numerous growth opportunities. Based on this, the brokerage firm maintained its 'buy' rating on Paytm and set a target price of ₹1,470, implying a potential upside of approximately 16% compared to the current price of ₹1,269.
Core Payments Business Gains Momentum
The report stated that Paytm's core payments business is gaining momentum. The company's revenue from payment services increased 10% quarter-on-quarter to ₹12.2 billion. This growth was driven by the increased use of affordable solutions such as credit cards over UPI and EMI at POS. According to JM Financial, Paytm's payment processing margin expanded to 3.58 basis points, and management expects further improvement in the coming months.
Record Growth in GMV and Subscriptions
The company's payments GMV (Gross Merchant Value) reached ₹5.7 trillion, a 6% increase from the previous quarter. Paytm's device subscriptions also saw a record jump, reaching an all-time high of 13.7 million, a 5.4% increase from the previous quarter.
New Opportunities from AI Innovation
According to a JM Financial report, Paytm recently launched the "industry-first AI Soundbox," which transforms payment alert devices into smart business assistants. This AI device provides real-time information on payments and merchant performance. The brokerage described this innovation as a strong testament to Paytm's technology leadership and its focus on AI-based solutions for merchants.
Strong Growth in Financial Services
According to the report, Paytm's financial services revenue grew 8.9% quarter-on-quarter to ₹6.1 billion. Merchant loans and equity broking contributed significantly to this growth. JM Financial stated that more than 50% of the company's loans were to repeat borrowers, indicating strong customer trust and retention. Furthermore, the company benefited from improved monetization in margin trade funding and equity broking.
Paytm Postpaid Rebrand
The company has relaunched its product, Paytm Postpaid, as a UPI-based "buy now, pay later" solution. This product provides short-term loans up to 30 days from a partner bank. JM Financial stated that the initial data for this product is "encouraging" and represents an important step in Paytm's financial innovation.
Improving Productivity and Profitability with AI
According to the brokerage firm, Paytm's management is now viewing AI not just as a cost-cutting tool, but as a revenue generator. Intelligent products based on merchant analytics, commerce cloud offerings, and in-house GenAI models are being developed through AI, which could open up new revenue streams in the future. Management claims that AI adoption has led to reduced collection costs, improved asset quality, and accurate insights into merchant payment behavior.
Strong balance sheet and expansion plans
Paytm's cash balance stood at ₹131 billion as of the second quarter, supported by a ₹23.7 billion stake sale by its subsidiary PayPay. This capital is sufficient to fund the company's expansion and technology investments. According to JM Financial, Paytm is now focusing on international expansion. The company will work with partners through revenue-sharing or licensing models and adopt a direct Paytm-driven model in select high-margin markets. The brokerage estimates that these plans will yield meaningful contributions within two to three years.
Positive Outlook for the Future
JM Financial stated that Paytm's sharp improvement in EBITDA was driven by operational efficiency and operating leverage. Contribution margin remained strong at 58.6% and was in line with management's target of "mid-to-high 50s." The brokerage believes that high payment margins, disciplined cost management, and AI-based monetization will enable Paytm to continue improving both profitability and growth in the coming quarters.
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