Paytm Q1 FY27 Results: Bernstein Retains 'Outperform' Rating

Paytm's financial services distribution business saw a significant surge in revenue, with a 45% year-on-year increase to Rs 814 crore in the June quarter. This growth was driven by the cross-sell of credit and other financial products.

The company's Q1 FY27 results were well-received by global brokerage Bernstein, which maintained its 'Outperform' rating and set a price target of Rs 1,500. Bernstein cited Paytm's non-linear profit growth, driven by revenue growth and operating leverage, as a key factor in its investment thesis.

Paytm's revenue rose 28% year on year, while indirect expenses grew just 6%, resulting in a 182% increase in EBITDA. On a comparable basis, excluding PIDF incentives, EBITDA rose nearly tenfold. The company's platform-building costs fell 3% year on year, despite continued investment in artificial intelligence and product development.

The brokerage also noted that payment volumes remained strong, with merchant GMV rising 31% to Rs 7.1 trillion and consumer UPI payment value growing 45%. Monthly transacting users increased to about 80 million from 74 million a year earlier, indicating continued growth in user engagement.

Bernstein highlighted strong payment volumes, tight cost control, and robust financial services growth as the quarter's key positives. The brokerage expects Paytm's earnings trajectory to remain intact, driven by its cost discipline and growth momentum.

Other brokerages, including Jefferies and Emkay, also expressed optimism about Paytm's prospects. Jefferies raised its target price to Rs 1,600 from Rs 1,450 and kept a Buy rating, while Emkay lifted its target to Rs 1,700 from Rs 1,500 and reiterated a Buy.

The positive outlook from brokerages is driven by Paytm's strong growth momentum and its potential for further margin gains through FY29. The company's ability to win customers and deepen its financial services business is expected to drive steady revenue growth in the coming years.

Paytm's financial services business has been a key driver of growth for the company, and its continued expansion is expected to contribute to its non-linear profit growth. The company's focus on cost discipline and investment in artificial intelligence and product development is also expected to support its growth momentum.

Overall, Paytm's Q1 FY27 results have been well-received by brokerages, which expect the company's growth momentum to sustain over the coming years. The company's strong financial services business and cost discipline are expected to drive its earnings trajectory and support its non-linear profit growth.

The growth of Paytm's financial services business is significant for the Indian fintech industry, which is expected to continue growing in the coming years. The company's ability to provide a range of financial services to its customers is expected to drive growth and increase financial inclusion in the country.

In conclusion, Paytm's Q1 FY27 results have been positive, with the company's financial services business driving growth and its cost discipline supporting its earnings trajectory. The company's prospects are expected to remain strong, driven by its growth momentum and potential for further margin gains through FY29.