Paytm's Q2FY25 Earnings Fuel Optimism: Analysts Upgrade Ratings Amid Strong Revenue Growth And Profitability Prospects

Yes Securities upgraded Paytm's stock to a ‘Buy’ rating, while Goldman Sachs positive on Paytm with the NPCI approval to resume new user onboarding for UPI services

BofA Securities noted that Paytm’s earnings surpassed its expectations, with revenues coming in 4 per cent higher than projected.

Source : Paytm

Paytm, India's leading mobile payments and financial services company and the pioneer of QR and mobile payments, has delivered a strong performance in Q2FY25 earnings. The company reported a significant 11 per cent quarter-on-quarter (QoQ) revenue growth to Rs 1,660 Cr, driven by the continued expansion of its payments and financial services distribution businesses.

Paytm’s improvement in profitability and EBITDA before ESOP has impressed top brokerage firms, many of which have maintained a positive outlook on Paytm’s future prospects. Notably, the company also received approval from NPCI to onboard new UPI users.

Several brokerage firms, including Yes Securities, Goldman Sachs, Bernstein, Macquarie, UBS, and BofA, have reiterated their positive outlook on Paytm following its strong September quarter earnings (Q2FY25) citing strong cost control, regulatory developments, and potential for long-term growth.

This optimism is reflected in rating upgrades, with analysts expressing confidence in Paytm’s ability to achieve EBITDA breakeven by the end of FY25.

'Goal of EBITDA Breakeven This Year Looks Real'

Yes Securities has notably upgraded Paytm's stock to a ‘Buy’ rating, highlighting the company's progress toward achieving profitability. Highlighting Paytm’s 11 per cent QoQ revenue increase to Rs 1,660 Cr and the improvement in EBITDA before ESOP to Rs (186) Cr, up by Rs 359 Cr QoQ, Yes Securities stated that the goal of achieving EBITDA breakeven this year appears attainable, driven by effective cost control and other key factors.

The brokerage firm Yes Securities shared a new price target of Rs 800. This is based on valuing the company at 4.8 times its expected sales for FY26.

Goldman Sachs also noted Paytm’s positive trajectory, particularly with the recent approval from the National Payments Corporation of India (NPCI) to resume new user onboarding for UPI services. “Paytm announced (on 22 October) that it has received NPCI approval for new user UPI onboarding, which should help restart MTU growth in our view, and also remove an overhang from the stock,” said the brokerage firm in a report. Goldman Sachs raised its target price to Rs 480 from Rs 420 while maintaining a ‘Neutral’ rating, with expectations that Paytm could achieve net income profitability by FY27.

Bernstein echoed a similar sentiment, calling Paytm’s Q2FY25 earnings a solid set of numbers, with clear improvement from previous quarters. The brokerage assigned an ‘Outperform’ rating with a target price of Rs 600. Bernstein also emphasized the importance of the NPCI approval for new UPI user onboarding, calling it a "positive regulatory development" that should bring relief and increase the chances of favorable outcomes in future regulatory decisions.

Meanwhile, BofA Securities noted that Paytm’s earnings surpassed its expectations, with revenues coming in 4 per cent higher than projected. The firm pointed to strong traction in both the payments and lending segments, coupled with solid cost control, which helped Paytm report an adjusted EBITDA loss of Rs 1.86 billion—well below BofA’s anticipated Rs 3 billion loss.

Macquarie noted that Paytm's EBITDA loss was smaller than expected, helped by higher distribution revenue and lower employee costs.
NPCI Grants Paytm Approval to Onboard New UPI Users

Global investment firm UBS highlighted that the approval from NPCI will enable Paytm to expand its customer base and capture a larger share of payments GMV, aiding in the recovery from a recent decline in Monthly Transacting Users (MTU).

Meanwhile, Bernstein noted that the National Payments Corporation of India (NPCI) granted Paytm permission to onboard new UPI users through a letter dated October 22. This positive development is expected to not only curb the drop in Paytm’s MTU but also boost investor confidence regarding potential favorable regulatory outcomes.

These positive analyst reports reflect increasing confidence in Paytm’s ability to deliver sustainable growth and profitability. The upgrades from prominent brokerage firms underline the company’s strong financial performance in Q2FY25 and its potential for long-term value creation.