Investec Names Paytm Its 'Quarterly Alpha' Pick With Massive Growth Forecast
Investec predicts a 28% revenue jump for Paytm, naming it a Quarterly Alpha pick with a target price of Rs 2,300.
Global brokerage Investec has identified One 97 Communications Ltd, the parent company of Paytm, as one of its top 'Quarterly Alpha' picks for the upcoming quarter. The fintech leader is expected to see a significant surge in its financial performance, driven by robust growth in its core business segments.
Projected Surge in Revenue and EBITDA
According to the brokerage's latest report released on October 7, Paytm is forecasted to achieve a 28% rise in net revenue for the quarter ending September. This growth is expected to be fueled by strong Gross Merchandise Value (GMV) and the continued momentum within its financial services division.
Investec’s projections are even more aggressive regarding profitability. The firm expects a staggering 78% jump in EBITDA, which could reach Rs 2.5 billion (Rs 250 crore) for the quarter. The brokerage's outlook for the company's earnings trajectory is notably bullish, with EBITDA estimates for the FY27-29 period sitting 2-9% ahead of the general market consensus.
Key Drivers of Growth
Several factors are contributing to this optimistic outlook for the fintech giant:
- GMV Expansion: Investec forecasts a 30% year-on-year growth in gross merchandise value.
- Financial Services Momentum: Revenue from the financial services distribution business is expected to grow by 41% year-on-year. This segment has already demonstrated consistent growth of 35-45% over the last three quarters.
- New Revenue Streams: The introduction of the UPI merchant discount rate (MDR), effective from October 15, is viewed as a significant additional income source for Paytm.
- Asset Quality: A stable asset quality environment is expected to support the company's loan distribution business.
Target Price and Market Outlook
Investec has maintained a 'Buy' rating on Paytm, setting a target price of Rs 2,300. This represents a potential total return of 35.7% from its reference price of Rs 1,695. The brokerage noted that Paytm's current valuations appear attractive when considering the company's earnings momentum and long-term growth potential.
Paytm was included in a select list of 15 stocks, appearing alongside other major names such as L&T, TCS, Bajaj Finance, and Union Bank of India.
Recent Performance Trends
This positive forecast follows a period of strong operational performance for the company. In recent quarters, Paytm reported:
- A 28% year-on-year increase in revenue from operations, reaching Rs 2,448 crore.
- A 79% rise in Profit After Tax (PAT) to ₹220 crore.
- A record quarterly EBITDA of Rs 203 crore.
- Consumer UPI gross transaction value (GTV) growth of 45% year-on-year, totaling Rs 5.9 lakh crore.
- A monthly transacting user base that has expanded to 8 crore users.