Jefferies Sees Paytm Core Business Strong, Maintains Buy Amid Incentives
Paytm’s core business continues to show strong momentum despite a near term earnings impact from the non-renewal of the RBI’s Payments Infrastructure Development Fund scheme, according to a Jefferies equity research report.
The report highlights that the discontinuation of PIDF incentives has led to a reduction in adjusted Ebitda estimates and a cut in the price target.
During FY25 and the first half of FY26, Paytm earned meaningful incentive income under the scheme, including Rs 1.28 billion in 1HFY26, which had contributed materially to adjusted Ebitda. With the scheme not rolled over beyond December 2025, Jefferies has removed this income from its forward estimates.
As a result, the brokerage has reduced adjusted Ebitda estimates for FY27 and FY28 and lowered its price target. However, Jefferies explicitly notes that this impact is incentive-driven rather than a reflection of weakness in Paytm’s underlying operations, and has therefore retained its Buy rating on the stock.
According to the report, Paytm’s core payments and financial services businesses continue to see healthy traction. Jefferies expects revenue to grow at a compound annual rate of approximately 23% over FY26 to FY28, led by strong growth in payments and financial services. Contribution margins are expected to remain stable at around 58% during this period.
The report further highlights operating leverage as a key driver of profitability, with adjusted Ebitda margins projected to improve steadily to nearly 17% by FY28. Net profit is also expected to scale meaningfully over the same period as revenue growth and margin expansion flow through.
Jefferies acknowledges that offsetting the loss of incentive income will require execution, including higher device subscription fees, improved take rates on non-UPI merchant payments, and cost controls. The brokerage has modelled conservative assumptions for these levers, factoring in only partial offsets rather than a full recovery of the lost incentive income.
Despite the earnings revisions and price target cut, Jefferies reiterates that Paytm’s business fundamentals remain strong, supported by improving profitability, stable unit economics, and a strong balance sheet. The report concludes that Paytm remains well positioned for medium term growth, with an attractive risk-reward profile underpinning its continued Buy recommendation.
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(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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