Paytm, operated by One 97 Communications, continues to maintain a dominant merchant payments platform, which is expected to drive its growth over the next two years, brokerage Jefferies on Monday.
The brokerage retained its ‘Buy’ rating on the stock with a target price of ₹1,350, projecting a 22 per cent compound annual growth rate (CAGR) in revenue between FY26 and FY28, along with expansion in adjusted EBITDA margins.
Jefferies said Paytm’s merchant platform is rapidly emerging as the largest in India across online and offline channels, supporting higher payment volumes and faster loan origination. The platform, with an active base of 45 million merchants, is expected to benefit from rising subscription device penetration and operating leverage.
Payments gross merchandise value (GMV) is forecast to grow at 23 per cent CAGR over FY26 to FY28, reaching ₹35 lakh crore by FY28 from Rs 24 lakh crore estimated for FY26, underpinned by a growing base of 13 million installed Soundbox devices, the brokerage added.
The company has also piloted an artificial intelligence-powered conversational Soundbox across 10,000 outlets and may maintain pricing to strengthen market share, the report noted.
Jefferies said Paytm’s merchant lending business is outpacing retail lending and offers better take rates, while highlighting long-term potential in credit on UPI, particularly if non-banking financial companies are allowed to lend through the platform.
The merchant lending vertical is also benefiting from the stronger platform, growing faster than the retail segment and offering better take rates, according to Jefferies. The brokerage sees a significant longer-term opportunity in credit on UPI, which could drive meaningfully higher volumes once non-banking financial companies (NBFCs) are permitted to lend through the rails, while also improving take rates on payments.
Financial services revenue is projected to grow at a 28 per cent CAGR over FY26-FY28, increasing its share in overall revenue. Total revenue is expected to reach about ₹12,500 crore by FY28.
The brokerage expects Paytm to post a profit after tax of ₹1,700 crore in FY28, compared to a loss of ₹1,417 crore in FY24. It also estimates a profit of ₹574 crore in FY26.
Contribution margins are seen stable at 55-56 per cent, while indirect expenses are projected to decline as a share of revenue, reflecting operating leverage.
Jefferies added that Paytm is expanding into wealth management and travel, with meaningful contributions expected from FY28 onwards, and noted limited impact from restrictions on real-money gaming and certain credit card-linked payments.
The company’s merchant platform, which Jefferies described as rapidly becoming the largest in India across both online and offline channels, is driving stronger payments volumes as well as accelerating loan origination.
With an active merchant base of 45 million and subscription device penetration projected to rise from 28 per cent to 36 per cent of its merchant network by FY28, the platform is expected to generate increasing operating leverage that will push adjusted EBITDA margins from 8.5 per cent to 16 per cent between FY26 and FY28, Jefferies added in its brokerage report.
Beyond its core payments and lending businesses, Paytm is also building capabilities in wealth management and travel platforms, with meaningful financial contributions from these verticals expected from FY28-FY29 onwards.
Jefferies flagged that Paytm also had a limited impact on restrictions on real money gaming (RMG) and rent or education payments made by credit card.