Paytm Hits 52-Week High as UBS Raises Target to ₹1,000

Shares of Paytm, operated by One97 Communications, rallied on November 28, 2024, as the stock soared 2.73% to hit a fresh 52-week high of ₹949.20 on NSE. The surge followed an update from UBS, a global financial services firm, which raised its target price for Paytm to ₹1,000, more than double its previous projection of ₹490.

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Despite this significant revision, UBS maintained a 'Neutral' rating on the stock. The new target price represents an approximately 8.82% upside from Paytm share price, last closed at ₹918.95. According to UBS, Paytm’s valuation now reflects substantial improvements, but further growth must be driven by revenue, as most cost optimization opportunities have already been realized.

Business Outlook and UBS Insights 

UBS, a New York based financial services firm, projects that Paytm’s revenue in FY26 will align with FY24 levels, with adjusted EBITDA expected to break even by Q4FY25. The firm also highlighted that Paytm’s stock has undergone a sharp re-rating in recent months, largely due to the resolution of regulatory challenges that had overshadowed its performance earlier in the year.

In January 2024, Paytm faced regulatory scrutiny when the Reserve Bank of India (RBI) imposed restrictions on Paytm Payments Bank (PPBL). The RBI flagged shortcomings in data protection and risk management processes, leading to tightened compliance measures. The resolution of these issues has since provided a clearer path for the company’s growth.

Q2 Financial Highlights

In Q2FY25, the company's consolidated net profit increased significantly from ₹290 crore in Q2FY24 to ₹930 crore. A one-time gain of ₹1,345 crore from the sale of its movie ticketing business to Zomato was the main driver of this surge.

Nevertheless, operating revenue fell 34% from ₹2,518 crore to ₹1,659 crore. Despite the decline in revenue, Paytm's Gross Merchandise Value (GMV) increased by 5% sequentially during the quarter, indicating steady performance.

Paytm Enhances UPI LITE Service with Automatic Top-Up Feature

Paytm’s UPI LITE service continues to cater to small-value payments with a daily transaction limit of ₹2,000. Designed for everyday expenses such as groceries, transportation, and other routine purchases.

Recently, Paytm introduced an automatic top-up feature for UPI LITE, ideal for small-value transactions up to ₹2,000 daily. This ensures seamless payments by recharging the balance automatically when it falls below a set limit. Users can make payments of up to ₹500 per transaction without a PIN, simplifying recurring expenses.

The service also allows users to download UPI statements to track transactions separately. Supported by major banks like SBI, HDFC Bank, and Axis Bank, Paytm’s UPI service has also expanded to international markets, including the UAE, Singapore, and France.

In Conclusion

Paytm’s recent rally and UBS’s optimistic target price indicate renewed investor confidence in the company. While regulatory hurdles have been addressed, UBS emphasizes that revenue growth will be critical for sustaining this momentum. Paytm’s profitability milestones, coupled with its continued efforts to streamline operations and expand its services, position it as a key player in India’s digital payments space.