Jefferies bets on Paytm, initiates 'Buy' call with target price of Rs 1300

Jefferies initiated coverage on Paytm with a ‘Buy’ citing the company’s increased credit business and the monetisation of its large eco-system.

Jefferies initiated coverage on Paytm with a ‘Buy’ citing the company’s increased credit business and the monetisation of its large eco-system. The analyst has given the stock a target price of Rs 1300, an upside of 37 percent from the stock’s current price.

According to Jefferies, “continued momentum in credit originations (4x F23-26E) and margin expansion in payments (300bps) will upfront profitability ahead of market expectation. In 4 quarters, Paytm will enter the global list of large profitable fintechs and valuations are yet to reflect its changed profile”.

Jefferies believes the fintech company will become profitable in the next 4 quarters. Along with that, the company will enjoy “strong growth (>30%), double-digit EBITDA margins and stable profitability”, Jefferies said in their note. The analyst added that the company is available at a discount valuation. “Its valuations at 3.6x FY25 EV/revenue remain at a ~40% discount” to a group of large fintechs globally, Jefferies said.

“We use DCF valuation methodology with growth assumptions of near-term 27%, long-term 17% and terminal 8%. At our valuation, we get implied EV/revenue of 4.6x and EV/adj. EBITDA of ~37x (Sep'25). Using SOTP (for stake in associates), we arrive at a PT of Rs 1,300.”, Jefferies added in their note.

The analyst pointed out regulatory risk, supply pressure from private equity (PE) selling and deterioration of asset quality which will impact credit business growth as key risks for the company.

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