Paytm shares decline after rising 2.5% post Q1 results; analysts decode the earnings

Shares of One 97 Communications, the parent company of fintech firm Paytm, slipped into the red after rising up to 2.58% to ₹1,382.40 apiece on the NSE in the early trade on Tuesday, July 21, following the company's June quarter (Q1 FY27) earnings announcement.

The company said that Q1 FY27 marked a broad-based accelerated growth in Payments and Financial Services for Merchant and Consumer Businesses.

Paytm said its revenue for the period jumped 28% YoY and 8% QoQ to ₹2,448 crore, while EBITDA, or operating profit, came in at ₹203 crore, up 182% YoY and 54% QoQ.

The company's profit after tax (PAT) came in at ₹220 crore, up 79% YoY.

What analysts said

Goldman Sachs said Paytm witnessed an acceleration in revenue growth during the first quarter of FY27 and reported a meaningful EBITDA beat, with EBITDA coming in around 20% above Goldman Sachs' estimates.

Within the payments business, growth was driven by market share gains across both offline and online segments. Goldman Sachs noted that the online business benefited from the company's ability to onboard new merchants starting late last year.

The investment firm also highlighted sustained traction in merchant loan distribution, while the scaling up of consumer products such as postpaid is expected to keep revenue growth elevated.

Goldman Sachs forecasts 27% year-on-year revenue growth in FY27, compared with 22% growth in FY26, while expecting EBITDA to more than double during the year.

CITI said Paytm's Q1 EBITDA of ₹200 crore exceeded its estimates by 16%, while revenue grew 28% year-on-year and contribution profit remained in line at 55% of revenue.

According to CITI, the earnings beat was largely driven by lower indirect costs, particularly cloud expenses, and stronger merchant loan distribution, which more than offset lower net payment margins due to device rentals.

Following the results, CITI has raised its earnings estimates for the company.

The investment firm also noted that recent media reports suggest the government may introduce a merchant discount rate (MDR) on high-ticket and large-merchant UPI transactions. It estimates that an industry MDR of 5-7 basis points could translate into a 0.5-1 basis point improvement in Paytm's net payment margin and an 8-10% upside to its FY28 EBITDA estimates.

Analysts at CLSA noted that Q1 FY27 EBITDA of ₹200 crore was marginally ahead of its estimate of ₹190 crore.

It highlighted the acceleration in payments GMV growth to 31% year-on-year, compared with growth in the mid-20% range in the previous quarter. Revenue growth in the financial services segment also accelerated from the high-30% range to the mid-40% range during the quarter.

However, CLSA pointed out that the calculated net payment take rate moderated sequentially from 8.8 basis points to 8.3 basis points.

With contribution margins remaining stable at 55%, lower growth in fixed costs helped EBITDA improve sequentially from ₹130 crore to ₹200 crore. Operating expenses also benefited from lower provisions for doubtful debt during the quarter.

The investment firm further noted that Paytm Payments Services has applied for a wallet licence.

Despite the operational improvement, CLSA trimmed its FY27-FY29 EBITDA estimates by 2-3% due to expectations of higher operating expenses. It added that the recent rally in Paytm's stock, driven by expectations of the return of MDR on UPI transactions, leaves little upside for the stock even if such a move materialises.