PAYTM Share Price Target at Rs 870: Motilal Oswal
PAYTM has witnessed high volatility over the last one year and the stock has been relatively stable during the last two months. The fintech has been dealing with regulatory agencies and the management has taken proactive approach to resolve the issues. Also, the company has improved its focus on core business. Motilal Oswal has retained a ‘Neutral’ recommendation on One 97 Communications (Paytm), revising its target price to Rs 870, implying a modest upside from the current trading levels. The brokerage cites positive momentum in the company’s financial services and merchant businesses, cost efficiency initiatives, and potential gains from a regulatory shift around UPI monetization. However, near-term concerns around UPI market share erosion and operating losses temper the optimism. With a strategic pivot toward profitability, Paytm is on a path to breakeven, projecting positive EBITDA by FY27E and profitability thereafter.
Merchant Business Holding Firm Despite Regulatory Noise
Paytm has successfully navigated recent regulatory turbulence while preserving its merchant network. The total merchant base expanded 9% year-over-year to 43 million in Q3 FY25. Meanwhile, the number of merchants using company devices rose 10% YoY to 11.7 million, indicating sustained adoption across the ecosystem.
The core merchant segment contributes 85% of the platform’s gross merchandise value (GMV). Although Paytm's UPI market share has declined, GMV is projected to grow at a 24% CAGR between FY25 and FY27, supported by this resilient merchant network and subscription-led revenue expansion.
Financial Services to Drive Revenue Diversification
Leveraging its merchant footprint, Paytm is scaling up its lending distribution through the First Loss Default Guarantee (FLDG) model, currently backed by 18 lending partners. This mechanism reduces partner risk, speeds up disbursements, and enhances take rates.
Motilal Oswal forecasts a 29% CAGR in loan disbursements over FY25–FY28. The financial services segment—encompassing loans, equity broking, and distribution of financial products—is expected to contribute 27% of total revenue by FY28, compared to 20% in FY24.
Path to Profitability: Breakeven Within Reach
Paytm has initiated a series of operational refinements to accelerate profitability. Key developments include:
Capex moderation and a shift toward device refurbishment, improving ROI and reducing depreciation
EBITDA breakeven projected by FY27E
PAT estimate of Rs 12.1 billion in FY27E
The company is expected to report adjusted EBITDA breakeven in Q4 FY25E, setting the stage for a turnaround. Margins will also be lifted by higher financial services revenue and operational leverage.
UPI Monetization May Alter Trajectory
Media speculation surrounding the potential introduction of Merchant Discount Rates (MDR) on UPI transactions could materially impact Paytm’s revenue model. Currently, UPI transactions operate on a zero-MDR basis, limiting monetization.
If implemented, this regulation could:
Enhance revenue from consumer payments
Justify aggressive UPI customer acquisition
Improve overall unit economics
This tailwind could catalyze a fresh growth cycle in consumer payments, offsetting recent declines in UPI market share.
Customer Metrics: Stabilization Underway
While Monthly Transacting Users (MTUs) dropped 30% YoY in Q3 FY25 to 70 million, a gradual recovery was visible by December 2024. Average GMV per MTU rose steadily to Rs 5,040, highlighting improved monetization per user.
Paytm is investing in broadening its customer base after securing NPCI approval to onboard new UPI users. The success of this re-engagement strategy will be key to restoring volumes and cross-selling financial services.
Contribution Margin on a Steady Climb
Motilal Oswal estimates that contribution margins will rise to 58% by FY28E, up from 55.5% in FY24. Drivers of margin expansion include:
A more profitable mix of financial services
Controlled rise in direct costs (projected 21% CAGR vs 25% revenue CAGR)
Stable payment processing costs relative to GMV
The net payment margin is expected to remain at 12 basis points of GMV by FY28, supported by subscription fees and managed incentive structures.
Valuation Metrics and Key Financial Forecasts
| Metric | FY24 | FY25E | FY26E | FY27E |
|---|---|---|---|---|
| Revenue from Operations (Rs Bn) | 99.8 | 71.5 | 91.6 | 113.7 |
| Adjusted EBITDA (Rs Bn) | 5.6 | -5.8 | 5.6 | 12.1 |
| PAT (Rs Bn) | -14.1 | -2.0 | 1.8 | 12.1 |
| P/E Ratio | NA | NA | 283.0 | 42.8 |
| Price-to-Sales (x) | 4.9 | 6.9 | 5.5 | 4.6 |
Paytm’s current valuation reflects muted near-term profitability, but rising earnings from FY27 onwards may justify a re-rating. The stock trades at a significant discount to its high-growth tech peers.
Investment Summary and Target Levels
Motilal Oswal maintains a ‘Neutral’ stance with a revised target price of Rs 870, based on a valuation of 17.7x Sep’26E EBITDA.
Key levels to watch:
Support: Rs 710
Intermediate Resistance: Rs 815
Target: Rs 870
The stock currently offers a 14% potential upside from the last traded price, contingent on execution across financial services, UPI monetization, and margin expansion.
Conclusion: A Gradual Rebuild with Strategic Levers
Paytm stands at an inflection point. While the business has absorbed shocks from regulatory tightening and market share losses, the pivot to financial services, controlled spending, and operational leverage provide credible visibility into long-term profitability. Key catalysts—like MDR implementation and Paytm Money’s expansion into wealth management—could further diversify its income streams.
