Paytm stock zooms 11% on NPCI nod to onboard new UPI users; brokerages mixed after Q2 show

Paytm stock has risen around 5 percent so far this year, underperforming Nifty's returns of 12 percent.

Shares of Paytm parent One 97 Communications gained over 11 percent on October 23 as the company received a nod from the National Payments Corporation of India (NPCI) to on-board new UPI users, nearly nine months after the Reserve Bank of India (RBI) placed an embargo on the addition of new customers.

In a letter to founder and chief executive officer (CEO) Vijay Shekhar Sharma, NPCI chief Dilip Asbe approved and permitted the fintech to begin new user onboarding. The nod to on-board new users may lead to an increase in UPI transaction volumes for the company.

This follows the company's announcement on October 21 that it recorded a net profit of ₹930 crore in Q2FY25, a significant turnaround from a net loss of Rs 290 crore in the same period last year.

However, this profit was largely attributed to a one-time gain of Rs 1,345 crore from the sale of its movie ticketing business to Zomato. Without this, the fintech company would have faced a net loss of Rs 415 crore, exceeding the loss reported in the year-ago period.

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Jefferies has maintained a 'Hold' rating on Paytm with a target price of Rs 700 per share. The firm highlighted that Paytm's Q2 EBITDA losses have decreased due to a 13 percent QoQ reduction in costs, coupled with a recovering topline. Paytm has also initiated DLG-based lending, which is in line with market practices.

Jefferies noted that an accelerated ramp-up in loan disbursals could bring Paytm closer to EBITDA breakeven. Additionally, the risk profile for Paytm has improved significantly following NPCI's approval for Third-Party Application Providers (TPAP).

The firm believes the current valuation of 3.1x September 2026 EV/Sales reflects near-term optimism, justifying the 'Hold' call.

Bernstein, on the other hand, has given Paytm an 'Outperform' rating, with a target price of Rs 600 per share. According to Bernstein, Paytm's Q2 performance saw positives in GMV growth and merchant loan disbursals.

However, the report flagged concerns about a continued decline in Monthly Transacting Users (MTUs) and a sequential drop in personal loan disbursals.

Bernstein also acknowledged that Paytm's focus on cost control is evident, as indirect expenses registered a sharp decline. Overall, the international brokerage views the Q2 results as showing clear improvement from the bottom reached in the previous quarter, maintaining optimism for future performance.

Also Read | Paytm gets NPCI approval to onboard new UPI users

Paytm's revenue for the September quarter declined by 34 percent YoY to Rs 1,660 crore. Sequentially, however, the income increased slightly from Rs 1,501 crore in Q1. The Noida-based firm's net payment margin increased to Rs 465 crore, largely on account of improvement in payment processing margin, better device realization and growth in GMV.

Paytm shares ended over 5 percent lower at Rs 684 on the National Stock Exchange (NSE) in the previous session. The stock has risen around 5 percent so far this year, underperforming Nifty's returns of 12 percent.

In the past 12 months, however, the counter has fallen 26 percent. In comparison, Nifty rose 28 percent during this period.

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