Paytm Set for Massive Q2 Surge, BofA Forecasts Rising Margins
Bank of America expects Paytm to report a significant jump in revenue and profitability for Q2 FY27, driven by payments and financial services.
Global brokerage Bank of America (BofA) has issued a highly optimistic outlook for Paytm, predicting that the fintech giant is poised to deliver another powerhouse quarter in Q2 FY27. According to the brokerage, the company is on track to maintain an upward trajectory in both revenue and profitability, fueled by robust expansion in its payments and financial services segments.
Revenue and Profitability on the Rise
BofA's detailed estimates suggest that Paytm's revenue for the second quarter could reach Rs 2,641 crore. This would represent a significant 28 per cent year-on-year increase and an 8 per cent growth compared to the previous quarter. The growth is expected to be driven by two main engines:
- Payments Revenue: Projected to climb by 31 per cent year-on-year.
- Financial Services Revenue: Anticipated to surge by an impressive 44 per cent.
The brokerage also expects a substantial leap in the bottom line. Net income is estimated to hit Rs 271 crore, marking a 76 per cent jump year-on-year and a 23 per cent increase sequentially. Furthermore, EBITDA is expected to reach Rs 263 crore, an 86 per cent rise compared to the previous year, with margins expanding by 166 basis points to hit the 10 per cent mark, thanks to a reduction in fixed costs.
Key Growth Drivers: Soundbox and Lending
A major component of Paytm's momentum lies in its hardware and lending ecosystem. BofA anticipates the addition of 0.5 million Soundboxes during this quarter, which will bolster the company's payments business. On the payments side, the Gross Merchandise Value (GMV) is expected to grow by 8 per cent sequentially.
Financial services remain a cornerstone of the growth story. While merchant lending continues to be a primary driver, BofA noted that consumer lending is also scaling well, even from a lower base. Additionally, the commerce and cloud services division is expected to see a recovery, with a projected 7 per cent quarter-on-quarter growth.
Positive Tailwinds and Market Upside
Several factors are working in Paytm's favor, providing potential upside for the stock. The brokerage highlighted the positive impact of the 40 basis points merchant discount rate (MDR) effective from October 15. Other key contributors include:
- Improved UPI market share.
- Stronger-than-expected traction in the merchant business.
- Growing momentum in the lending sector.
BofA has reiterated its Buy rating on the stock, projecting that Paytm's EBITDA will achieve a compound annual growth rate of 82 per cent between FY27 and FY29. This bullish outlook follows a strong Q1 FY27, where the company reported its highest-ever quarterly EBITDA of Rs 203 crore and a 79 per cent rise in net profit.