Paytm's Resilient Growth Amid Incentive Challenges

Despite the discontinuation of the RBI's Payments Infrastructure Development Fund scheme impacting its earnings, Paytm's core business shows strong momentum. Jefferies' report highlights the firm's robust fundamentals, with expectations of 23% revenue growth and improved profitability by FY28. The company retains a Buy rating.

Paytm's robust business trajectory remains undeterred even as the cessation of the RBI's Payments Infrastructure Development Fund scheme affects short-term earnings, according to an equity research report by Jefferies.

The report notes that the termination of PIDF incentives results in revised adjusted EBITDA estimates and a reduction in the company's stock price target. Despite generating significant incentive income from the scheme during FY25 and 1HFY26, Jefferies excludes this from future projections, reflecting an incentive-based, rather than operational, impact.

Nevertheless, Paytm's foundational payments and financial services sectors display strong growth prospects, with anticipated revenue expansion of around 23% annually from FY26 to FY28. Operating leverage is poised to enhance profitability, with adjusted EBITDA margins predicted to reach nearly 17% by FY28, underscoring the business's stable economic model and reinforcing Jefferies' continued Buy recommendation.

(With inputs from agencies.)