Neutral One 97 Communications; target of Rs 1000: Motilal Oswal

Motilal Oswal's research report on One 97 Communications

Paytm’s business metrics continue to see a gradual recovery, led by healthy momentum in merchant business, while disbursement volumes and GMV are also growing at a steady rate. Resumed customer onboarding, stabilization in MTUs and continued recovery in financial services business will drive healthy growth in revenues. After a sharp decline in FY25, payment revenue is also estimated to grow by 17% in FY26E. The company plans to expand its merchant market share by leveraging deeper financial integration, robust device deployment and focus on high-GMV merchants alongside FLDG-backed monetization opportunities. Paytm’s GMV is thus expected to clock a 23% CAGR over FY25-28E and its disbursement growth rate is estimated to accelerate to 35%, led by a continued thrust on the merchant business and a recovery in consumer lending. We estimate a 26% CAGR in financial services revenue, with the segment’s share in total revenue expected to rise by more than 250bp to ~27% by FY28E. Healthy revenue growth and disciplined cost control will boost contribution margins to ~58% by FY28E, supporting a steady path toward long-term profitability.

Outlook

While structural levers are strong, the fast-evolving digital payment industry, a decline in UPI market share and regulatory risks (recent government disapproval of MDR on UPI transactions) keep us cautious. Maintain Neutral with a revised TP of INR1,000.

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