New Delhi [India], November 5 : Brokerage firm JM Financial has reaffirmed its positive view on payments major Paytm, stating that the company continues its "track record of delivering better-than-expected profits for another quarter."
In its latest report dated November 5, the brokerage firm said Paytm reported revenue of Rs 20.6 billion, up 7 per cent quarter-on-quarter, with contribution margin maintained at 59 per cent, which it described as being at the higher range of management guidance.
According to JM Financial, Paytm's EBITDA almost doubled sequentially to Rs 1.4 billion, driven by improvement in payment processing margin and efficiencies in indirect expenses.
The brokerage said, "With sustained strength in operating performance along with multiple growth optionalities, we find attractive risk-reward at current levels," while reiterating its 'Buy' rating and setting a higher target price of Rs 1,470, implying nearly 16 per cent upside potential.
Currently, Paytm shares are at Rs 1,269.
The brokerage report noted that Paytm's core payments business is "picking up pace," with payment services revenue rising 10 per cent quarter-on-quarter to Rs 12.2 billion.
JM Financial said this growth was "driven by a rising mix of credit card on UPI and affordability solutions such as EMI on POS."
The brokerage firm estimated that Paytm's payment processing margin improved to 3.58 basis points and cited management guidance that this is expected to sustain and improve further.
Payments GMV (gross merchandise value) stood at Rs 5.7 trillion, up 6 per cent sequentially, while device subscriptions reached an all-time high of 13.7 million, up 5.4 per cent from the previous quarter.
JM Financial said Paytm has launched the "industry-first AI Soundbox," which transforms the device "from a payment alert device into an intelligent business assistant capable of delivering real-time insights on payments and business performance."
The brokerage described this innovation as evidence of Paytm's technology leadership and its focus on building AI-led solutions for merchants.
In its report, JM Financial observed that financial services revenue rose 8.9 per cent sequentially to Rs 6.1 billion, led by merchant loans and equity broking.
The brokerage highlighted that more than 50 per cent of loans were issued to repeat borrowers, reflecting strong merchant retention.
It also pointed to improved monetisation across equity broking and margin trade funding.
The report said Paytm has relaunched Paytm Postpaid as a "Spend Now, Pay Next Month" product linked to UPI, offering up to 30 days of short-term credit from a partner bank, and noted that early metrics for this product are encouraging.
Quoting the company's management, JM Financial said, "AI is evolving from being a cost-efficiency enabler to a key revenue driver, with multiple monetisation opportunities emerging across merchant analytics, commerce cloud offerings and intelligent agentic products built on Paytm's proprietary in-house GenAI model."
The brokerage added that management has reported "measurable productivity gains through AI adoption," including lower collection and DLG costs, better partner asset quality and improved visibility on merchant churn and repayment behaviour.
The report highlighted that Paytm's cash balance stood at Rs 131 billion as of the second quarter, supported by PayPay stake monetisation of Rs 23.7 billion, which provides ample capital for expansion and technology investment.
JM Financial said Paytm has outlined its international expansion framework, which will include partner-operated models with revenue-sharing or licensing arrangements, similar to PayPay, and Paytm-operated models in select high-margin markets, with meaningful contribution expected in two to three years.
The brokerage stated that "operating leverage has led to sharp EBITDA improvement," as contribution margin remained robust at 58.6 per cent.
It said the contribution margin remains in line with management guidance of "mid to high 50s" and added that further efficiency in fixed costs is expected to support operating leverage.
In conclusion, JM Financial reaffirmed its 'Buy' rating on Paytm, saying it expects profitability to continue improving, supported by higher payment margins, disciplined cost management and AI-led monetisation.
The brokerage said the company remains well-positioned to scale lending as credit sentiment improves, deepen merchant reach in tier 2 and beyond markets, and maintain its leadership in merchant payments.
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