In its latest report titled “First Take: All-round beat”, JP Morgan said Paytm‘s focus on its merchant franchise and sharp cost control following the resolution of regulatory restrictions has helped the company achieve EBIT breakeven, proving the resilience of its merchant-led model.
The brokerage highlighted that Paytm’s second-quarter FY27 results exceeded expectations across revenue and margins, with revenue growing 28% year-on-year, or 33% excluding PIDF incentives. Growth was broad-based, led by financial services, which expanded 49%, followed by marketing services at 26% and payments at 25%.
JP Morgan also noted accelerating consumer engagement, with monthly transacting users increasing 13% year-on-year, compared with average growth of 8% over the preceding three quarters. Merchant device deployments grew 19% year-on-year, further strengthening Paytm’s payments ecosystem.
The brokerage highlighted improving operating efficiency, with contribution margin expanding 71 basis points sequentially to 55.9%, ahead of its estimates. Ebitda margin also increased 190 basis points quarter-on-quarter to 10.2%, exceeding both JP Morgan and consensus expectations.
While JP Morgan flagged a moderation in GMV growth and potential near-term pressure from higher default loss guarantee costs, it expects Ebitda to continue expanding despite these additional expenses.
The brokerage also noted that Paytm’s merchant-led strategy has enabled the company to strengthen its business even without a sharp recovery in its consumer franchise. It expects Ebitda margins to reach 23% by FY29, supported by improving UPI economics.
Maintaining its ‘Overweight’ rating, JP Morgan said Paytm’s broad-based revenue growth, improving customer engagement and stronger margins reinforced its positive investment outlook.
The brokerage’s assessment highlights how Paytm’s merchant-focused strategy is translating into improving operating performance and a more resilient business model. (ANI)