Brokerage firm JM Financial highlighted that AI-led automation is playing a crucial role in enhancing Paytm’s cost efficiency, enabling the company to maintain costs steady even amid accelerated growth. The recent Q1 FY27 results of Paytm were described as another period of robust performance, surpassing profit estimates. Despite ongoing investments in merchant and consumer acquisition, the company saw improvements in its financials.
JM Financial emphasized the significance of AI-led automation in areas like collections, customer service, and merchant acquisition, contributing to cost efficiency by keeping non-sales overheads stable. The report also noted that Paytm’s financial services distribution arm is experiencing rapid growth, with revenue climbing 45% year-on-year to Rs 814 crore in the first quarter of FY27, primarily driven by merchant and consumer lending distribution.
Merchant lending was identified as the primary revenue generator in the financial services segment, with Paytm collaborating with numerous lending partners to expand its loan distribution capacity. The company’s consumer lending business also witnessed substantial growth, with a 36% increase in financial services customers year-on-year. Paytm Postpaid, a key offering, is expanding rapidly and is expected to contribute significantly to revenue and EBITDA from FY28 onwards.
Additionally, wealth management services such as the Margin Trading Facility, broking, and mutual fund distribution are emerging as strategic growth pillars for Paytm. The report forecasts a 29% compound annual growth rate in financial services revenue between FY26 and FY29. Notably, Paytm’s payment segment demonstrated strong performance, with revenue and gross merchandise value rising by 28% and 31% respectively year-on-year, driven by growth in offline, online, and consumer payments.
The reported EBITDA margin showed a sequential expansion of 247 basis points to 8.3%, surpassing profit estimates by 18%, aided by efficient cost management. Management anticipates achieving the targeted 15–20% EBITDA margin sooner than expected, with a positive outlook on long-term margin sustainability. JM Financial revised its EBITDA estimates for FY27–29 upwards by 1% to 17%, maintaining a Buy rating and setting a target price of Rs 1,500 for Paytm, valuing the company at 40 times the FY28 estimated EBITDA.
