Morgan Stanley Applauds Paytm's Q2 Surge with Strong Growth

Morgan Stanley credits Paytm's Q2 FY26 success to improved payment processing margins, growth in lending revenue, and disciplined cost management. EBITDA jumped to Rs 1.4 billion, marking substantial progress. The company anticipates further growth, aided by AI-driven efficiencies and a focus on higher-margin services and consumer lending.

Paytm's stellar performance in the second quarter of FY26 has earned praise from brokerage firm Morgan Stanley, citing improved payment processing margins, robust lending revenue growth, and disciplined cost control as pillars of its profitability surge. EBITDA saw a remarkable rise to Rs 1.4 billion, up from Rs 0.7 billion last quarter, reflecting a significant operational turnaround.

The firm's report highlighted a strong 24% year-on-year revenue increase, with potential for further growth as consumer unsecured lending gains momentum. An improved payment GMV mix, particularly towards cards on UPI and EMI-backed payments known for higher margins, coupled with declining processing costs, has bolstered the company's financial position. Financial services experienced a 63% YoY rise, driven by merchant loans, and consumer lending is set for improvement as Paytm's postpaid services gain traction.

Efficient management of indirect costs, excluding ESOPs, led to a 5% YoY and 2% QoQ reduction, while a 18% YoY drop was noted when including ESOPs, further enhancing profitability. The firm projects buoyant future performance with EBITDA expected to leap from Rs 6.7 billion in FY26 to Rs 25.2 billion in FY28. Paytm's strategic focus on embedding AI across its operations promises to enhance efficiency and unlock new monetization routes, while its strong push in merchant acquisition anticipates significant scale-up in the coming quarters.

(With inputs from agencies.)