Paytm shareholders have had a strong few months. The stock has gained around 40% in the past three months and nearly 68% over six months. Over the last two years, the stock has risen about 165%.
For example, if an investor had purchased Paytm shares worth ₹1 lakh two years ago and continued holding them, the investment would now be worth roughly ₹2.65 lakh, based on the stated return.
The stock also closed 2.24% higher on October 7. Now, a new brokerage report dated October 8 has placed a ₹2,300 target price on the stock. With the share price already seeing a sharp rally, investors may wonder what could drive further upside.
Investec Gives Paytm a ‘Buy’ Rating
Brokerage firm Investec has maintained a Buy rating on the shares of One 97 Communications, Paytm’s parent company.
The brokerage has considered a share price of ₹1,695 and assigned a target of ₹2,300. This represents an estimated upside of around 35.7% from the reference price.
However, a target price is only a brokerage estimate. It does not guarantee that the stock will reach that level.
What Could Change in Paytm’s Business?
Investec expects Paytm to report a strong performance in the second quarter of FY2026-27, covering July to September 2026.
The brokerage estimates that Paytm’s GMV could increase by around 30% year-on-year. GMV, or Gross Merchandise Value, refers to the total value of transactions processed through the platform.
Importantly, GMV should not be confused with revenue. If a customer makes a ₹500 payment to a merchant through Paytm, the entire ₹500 does not become Paytm’s income.
After excluding PIDF and UPI incentives, Investec expects net revenue to grow by around 28%. This suggests that the brokerage sees underlying revenue growth even after accounting for these items.
EBITDA Could Rise Sharply
Investec estimates that Paytm’s EBITDA could reach around ₹250 crore in the second quarter, representing approximately 78% growth compared with the same quarter a year earlier.
EBITDA is a measure used to assess operating performance before the impact of interest, taxes and certain accounting expenses.
Therefore, ₹250 crore of EBITDA should not be treated as ₹250 crore of net profit. The company’s final profit can be different after interest, taxes and other expenses are considered.
The expected improvement in operating earnings is one of the key reasons behind Investec’s positive view of the stock.
Financial Services Business Remains Important
Paytm’s financial services business is another area that Investec is watching closely. According to the report, revenue from this segment could increase by around 41% in the second quarter.
The segment has recorded annual growth of approximately 35% to 45% during the previous three quarters, according to the report.
Loan distribution remains an important part of this business. In simple terms, Paytm helps connect customers with partner banks and financial institutions for loans. This does not necessarily mean that Paytm provides every loan using its own funds.
Investec believes the current environment around loan quality is supportive for this business. If repayment conditions remain favourable, partner financial institutions may have greater scope to expand lending activity.
UPI Monetisation Could Be Another Factor
Investec’s report also discusses UPI MDR as a potential source of monetisation. The report considers an implementation date of October 15, 2026.
MDR, or Merchant Discount Rate, generally refers to a fee associated with accepting certain digital payments. It should not simply be interpreted as a fee charged to customers every time they make a UPI payment.
This point is based on the brokerage report, and the actual implementation and scope should be verified through official announcements.
According to Investec, expectations around such a development had previously contributed to a 30%–40% rise in the stock. Following the announcement, the stock reportedly corrected by around 10%. The brokerage considers the valuation more attractive after this decline.
Valuation and Key Risks
Investec has also assessed Paytm’s valuation against its estimated future operating earnings. Based on the report’s estimates, the stock trades at around 30 times EV/EBITDA for FY2027-28 and approximately 19 times for FY2028-29.
In simple terms, the current valuation could become more reasonable if Paytm delivers strong earnings growth in the coming years. However, if growth falls short of expectations, the valuation could remain demanding and the stock price may face pressure.
Paytm Share: Key Numbers at a Glance
| Parameter | Details |
|---|---|
| Stock | One 97 Communications (Paytm) |
| Recent 3-month return | Around 40% |
| Recent 6-month return | Around 68% |
| 2-year return | Around 165% |
| Reference share price in Investec report | ₹1,695 |
| Investec target price | ₹2,300 |
| Implied upside | Around 35.7% |
| Q2 FY2026-27 estimated GMV growth | Around 30% YoY |
| Estimated net revenue growth | Around 28% |
| Estimated Q2 EBITDA | ₹250 crore |
| Estimated EBITDA growth | Around 78% YoY |
| Financial services revenue growth estimate | Around 41% |
| FY2027-28 EV/EBITDA | Around 30x |
| FY2028-29 EV/EBITDA | Around 19x |
Bottom line: Paytm’s recent stock performance has been strong, while Investec sees further potential based on expected growth in GMV, revenue, EBITDA and financial services. At the same time, investors should remember that brokerage targets are estimates, and actual results, valuations and regulatory developments can materially affect the stock.
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