23-07-2025
Paytm share price drops 3.5% after hitting 52-week high. Should you buy, sell or hold after Q1 profit?
Shares of Paytm parent company One97 Communications reversed gains as it declined over 3.51 per cent after hitting a 52-week high in Wednesday's early morning session following the announcement of the Q1 results for fiscal year 2025-26 (FY26) a day ago.
Paytm share price opened at fresh high of ₹ 1,090 apiece today. However, it declined quickly to ₹ 1,039, giving up early gains.
On Tuesday, One97 Communications share price rose 3.5 per cent to close at ₹ 1,053.10. The stock has gained over 5 per cent in past five trading sessions and nearly 19 per cent in a month.
The company posted a consolidated net profit of ₹ 122.5 crore in Q1FY26, a significant improvement from a net loss of ₹ 839 crore in the same period last year.
Its operating revenue climbed 28% year-on-year to ₹ 1,917 crore, up from ₹ 1,502 crore in Q1FY25. On a quarter-on-quarter basis, revenue growth was modest at 0.3%, compared to ₹ 1,911 crore in Q4FY25, when the firm had recorded a net loss of ₹ 540 crore.
The revenue boost was driven by a rise in subscription-based merchants, increased Gross Merchandise Value (GMV), and higher income from financial services distribution.
The company reported a turnaround in its financials, with EBITDA reaching ₹ 72 crore (a 4% margin) and profit after tax (PAT) at ₹ 123 crore. This improvement was attributed to AI-driven operational efficiencies, a disciplined approach to cost management, and increased other income, according to the company's filing.
'In Q1 FY26, Paytm delivered a steady performance, turning profitable across key financial metrics and reinforcing its leadership in India's digital payment ecosystem. Operating revenue grew 28% YoY to Rs.1,918 crore, driven by a surge in merchant subscriptions, rising Gross Merchandise Value (GMV) of Rs.5.4 lakh crore (+27% YoY), and a 100% YoY increase in financial services distribution revenue to Rs. 561 crore. The company's contribution profit surged 52% YoY to Rs.1,151 crore with a robust contribution margin of 60%, reflecting improved net payment revenue, a favorable shift towards non-default loss guarantee (non-DLG) loan disbursements, and tighter control on direct expenses. EBITDA turned positive at Rs.72 crore, and PAT came in at Rs.123 crore, aided by improved operational leverage and higher other income,' said Seema Srivastava, Senior Research Analyst at SMC Global Securities.
Srivastava further added, ' Moreover, net payment revenue rose 38% YoY to ₹ 529 crore, and merchant device subscriptions reached an all-time high of 1.30 crore. Strategic cost rationalization was evident, with indirect expenses (ex-ESOP) down 19% YoY and ESOP costs slashed 88% YoY due to voluntary surrenders. Despite a decline in marketing service revenue ( ₹ 247 crore, -23% YoY), the company continued to optimize ad targeting using AI. The quarter also highlighted strong adoption of AI across operations from fraud detection to personalized product offerings. With ₹ 12,872 crore in cash reserves and reduced ESOP and D&A burdens, Paytm is well-positioned for sustained profitability. Its AI-driven, full-stack merchant ecosystem and increased focus on non-DLG lending mark a strategic pivot toward high-margin, scalable revenue streams.'
Brokerage firm Motilal Oswal has reiterated its 'neutral' rating on the Paytm stock, with a target price of ₹ 1,025. 'We maintain our contribution profit estimates and project Paytm to turn EBITDA positive by FY26. We value PAYTM at ₹ 1,025 based on 21x FY27E EBITDA, which corresponds to 6.8x FY27E sales. We reiterate our NEUTRAL rating on the stock,' the brokerage firm said in a note.
Meanwhile, global brokerage firm Jefferies has upgraded the Paytm stock to 'buy' from earlier rating of 'hold', along with raising the target price to ₹ 1,250 from ₹ 900 earlier after the Q1 results.
Jefferies is of the view that although the sequential growth in Monthly Transacting Users (MTU) and Gross Merchandise Value (GMV) is promising, contribution margins are likely to settle at slightly lower levels over the next two to three quarters.
