New Delhi [India], January 23 : Paytm is positioned as a "payments toll-road operator" within India's digital commerce ecosystem, according to an Investec Equities research report that initiated coverage on One 97 Communications Ltd with a Buy rating and a target price of Rs 1,550. The research firm states that the company operates across "structurally oligopolistic segments" including UPI P2M, soundbox devices, payment gateways, and merchant loan distribution. The report notes that Paytm's market leadership in these areas enables significant operating leverage and margin expansion.
Investec highlights the scale of Paytm across the merchant acquiring landscape and notes that the company maintains over 50 per cent market share in soundbox devices. The report further details that the fintech firm holds approximately 10 per cent share in physical POS machines and between 15 and 20 per cent share in online payment gateways. According to the findings, these dominant positions serve as a foundation for future financial performance.
The research report projects Paytm's net revenue to grow at a 23 per cent compound annual growth rate (CAGR) between FY26 and FY28. This growth is expected to be driven by rising payment volumes, improving payment processing margins, and a higher contribution from financial services distribution. Investec also estimates that EBITDA margins expand to 24 per cent by FY28, which represents a significant increase from the 8 per cent recorded in the first half of FY26. The firm attributes this improvement to sustained operating leverage and controlled growth in costs.
Investec points to the large and engaged merchant base of Paytm as a "long-term monetization engine" for the platform. With approximately 47 million registered merchants, the company benefits from recurring subscription revenue from its various devices.
This ecosystem enables the cross-selling of merchant loans, consumer loans, insurance, and equity broking. The report anticipates financial services distribution revenue to grow at a 31 per cent CAGR over the FY25-FY28 period and eventually contribute 42 per cent of net revenue by FY28.
Regarding regulatory developments, the report notes that Paytm stabilised its market position in the first half of FY26 following restrictions related to its payments bank. The migration of UPI operations to partner banks and the strengthening of compliance processes helped mitigate the impact of these challenges.
The report identifies the resumption of new UPI user onboarding, following approval from the National Payments Corporation of India (NPCI) in October 2024, as a "key inflection point" for the business.
Investec valued Paytm at 37x FY28E EV/EBITDA using a discounted cash flow methodology. The brokerage cited the company's position as a "gateway to India's digital commerce and embedded finance opportunity." The research firm expects total returns of 23 per cent from current levels and reiterated its Buy recommendation for the stock.
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