Emkay Research has reaffirmed its BUY recommendation on One 97 Communications (Paytm), assigning a target price of Rs 1,050, as the company charts a clear path to net profitability by FY26. Despite reporting a loss in Q4FY25, Paytm’s core business metrics reflect a structurally sound foundation, marked by steady subscription revenues, improving operating leverage, and increasing device penetration. With potential regulatory catalysts on the horizon, including a payment aggregator license and UPI monetization, the fintech giant appears poised for a turnaround, driven by a robust merchant ecosystem and disciplined capital deployment.

Q4FY25: Stabilization Continues Despite Net Loss

Paytm reported a net loss of Rs 6.1 billion in Q4FY25, attributed largely to a Rs 4.9 billion ESOP expense following relinquishment by MD & CEO Vijay Shekhar Sharma. Excluding this non-cash item, the company posted positive EBITDA of Rs 0.8 billion, its fifth consecutive quarter of operational profitability on an adjusted basis.

Management guidance indicates FY26 as the year of breakeven net profit, driven by operational normalization, revival in lending, and increased monetization opportunities.

Payment Services: Resilient Performance Across Key Metrics

In the payments segment, GMV rose 9% YoY and 1% QoQ, defying seasonal softness. The merchant base expanded by 1 million, and the penetration of devices increased to 23% of total merchants.

Net payment margin remained stable at 9bps, bolstered by an improving mix of profitable merchant transactions and lower cashback expenses.

MTUs (Monthly Transacting Users) increased by 0.2 million, reaching 72 million, sustaining Paytm's top-of-funnel growth necessary for cross-selling financial services.

Revenue Uplift Potential Through UPI MDR and Licensing

The upcoming reinstatement of Merchant Discount Rate (MDR) on UPI transactions over Rs 2,000 could be a game-changer. Management expects to capture 5–10bps out of a 30bps pool, significantly enhancing net revenue margins.

Paytm also anticipates receiving the long-awaited payment aggregator and wallet licenses, unlocking further monetization avenues in its online GMV stack.

Credit Business: Merchant Lending Anchors Growth

Paytm disbursed Rs 57 billion in loans during Q4, with merchant loans accounting for Rs 43 billion—a 13% QoQ growth. Personal loan volumes dropped due to conservative stance by lending partners, but are projected to rebound in H2FY26.

The company now has 14 active lending partners, signaling sustained confidence in its credit underwriting model.

Capital Allocation: Efficient Redeployment and Lower Depreciation

Management has shifted focus from aggressive device expansion to redeployment and optimization of idle devices, significantly lowering capex intensity. For FY26, capex will remain below FY24 levels, and depreciation is expected to reduce to Rs 5–6 billion, aiding earnings.

Automation efforts have also helped curtail non-sales employee expenses, improving cost structure.

Valuation and Financial Projections

Emkay’s target price of Rs 1,050 is anchored in a DCF valuation, implying FY27E EV/revenue of 3.1x and P/B of 3.0x. Paytm’s path to profitability is underpinned by margin expansion and growing top-line visibility.

Here is a snapshot of Emkay’s financial projections:

Analyst Commentary and Strategic Outlook

Emkay Research maintains confidence in Paytm’s ability to leverage its diversified ecosystem, disciplined cost structure, and high-velocity merchant network. The resumption of lending momentum and regulatory green lights could act as potent catalysts in FY26 and beyond.

With a clear profitability roadmap, efficient capital deployment, and steady subscription growth, Paytm appears structurally well-positioned for a sustained rerating.

Long Term View: On Track for a Re-rating in FY26

As One 97 Communications pivots from heavy investment mode to monetization and margin enhancement, the company is demonstrating signs of sustainable financial maturity. While execution risks remain, particularly on regulatory timelines, the combination of license wins, UPI MDR, and merchant-led growth could drive material earnings reacceleration.