Goldman Sachs bullish on Paytm, reiterates 'Buy' rating on stock

Goldman Sachs maintains its 'Buy' rating on Paytm, highlighting accelerating growth momentum. The brokerage notes Paytm expects revenue growth in the '20s percentage' with a path toward 15-20% EBITDA margins and strong growth in merchant lending.

Global brokerage Goldman Sachs has reiterated its "Buy" rating on Paytm, stating that the company is witnessing "accelerating growth momentum across multiple segments" as it scales its payments, lending and financial services businesses.

Financial Outlook and Profitability

In its latest report, after hosting Paytm management at the Asia Communacopia and Technology conference, Goldman Sachs said the company expects revenue growth to accelerate in FY27, with operating leverage continuing to improve.

According to the report, Paytm sees a path toward 15 per cent to 20 per cent EBITDA margins over the next two to three years.

The brokerage highlighted that Paytm expects revenue growth in the "20s percentage" range over the near to medium term, supported by nearly 55 per cent contribution margins and improving profitability.

Strong Momentum in Payments Business

Goldman Sachs said that Paytm's payments business continues to remain strong, with the company expecting gross merchandise value (GMV) growth in the '20s per cent' range over the next several years, broadly in line with industry growth. The report added that improving net payment margins and a rising mix of higher margin payment instruments could help revenue growth outpace GMV growth.

The report also noted that Paytm added around 2.5 million to 3 million merchant devices in FY26 and expects device additions to continue at similar levels going forward.

Financial Services Identified as Key Growth Driver

On financial services, Goldman Sachs described Paytm as being "uniquely positioned in the merchant lending category," identifying the segment as one of the biggest long-term growth drivers for the company.

Merchant Lending

According to the report, Paytm management said its merchant lending business has "limited cyclicality" and has doubled in scale over the last two years.

The company expects merchant lending growth to compound at 35 per cent to 40 per cent over the next few years, driven by merchant expansion, deeper penetration and higher ticket sizes.

Goldman Sachs further noted that Paytm believes its high merchant engagement provides stronger underwriting quality and early warning signals for collections.

The report added that daily repayment capability through payment companies creates a "structural advantage" for Paytm in merchant lending.

Broader Growth and Consumer Lending

The brokerage added that Paytm expects its broader financial services business to grow in the "30s percentage" range over the coming years, with Postpaid products remaining a focus area in consumer lending because of stronger margins.

Marketing Services and Regulatory Update

Goldman Sachs also pointed to improving momentum in Paytm's marketing services business, including advertising and travel ticketing. According to the report, the segment is expected to return to growth, led by increasing monthly transacting users and monetisation opportunities.

Importantly, the report stated that Paytm has not seen any meaningful impact on revenues from recent regulatory changes related to rent payments, real money gaming or equity broking.

Price Target Reaffirmed

Goldman Sachs maintained its 12-month target price of Rs 1,400 on Paytm shares, implying an upside potential of nearly 27 per cent from current levels.

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