Paytm's Q2 results outperform; Bernstein raises target to Rs 1,600

Bernstein report rates Paytm 'Outperform', raising the target price to Rs 1,600. The firm's Q2 results beat market expectations, driven by improved margins, higher loan distribution, tight cost control, and a 28% jump in GMV.

The digital payments and financial technology company, Paytm's business showed strong improvement in the September quarter (2Q26), with better margins, higher loan distribution, and tight cost control helping the company outperform market expectations, according to a recent report by Bernstein. The report continues to rate Paytm as Outperform and raised its target price to Rs 1,600.

Strong Financial Performance

The brokerage highlighted that Paytm reported EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of Rs 1.4 billion, which was around 20 per cent higher than consensus estimates. The report stated "We model an Accelerated Improvement in margins, driven by assumptions of higher payment margins and modest increases in financial services revenue growth".

Key Performance Metrics and Cost Discipline

It said Paytm's performance was supported by a 28 per cent year-on-year jump in Gross Merchandise Value (GMV) and a 0.6 bps quarter-on-quarter improvement in net payments margin, which rose to 10.4 bps. The brokerage noted that Paytm benefited from better processing margins, mainly due to an increased share of EMI transactions on its POS devices and a rising contribution from credit card payments on UPI. Along with this, the report mentioned that the company maintained strict cost discipline, with indirect expenses falling 1 per cent QoQ. Financial services revenue continued to expand steadily, rising 9 per cent QoQ and 63 per cent YoY, driven by lending products. The only area of weakness was marketing revenue, which declined 8 per cent QoQ and 25 per cent YoY.

Structural Positives and Future Potential

The report also highlighted several structural positives in Paytm's business. The number of frontline sales employees increased by 5,000 quarter-on-quarter, which the brokerage said could help Paytm gain more online and offline merchants and may lead to stronger GMV growth ahead. The firm also pointed out that Paytm's recently reintroduced BNPL (Buy Now Pay Later) product previously accounted for more than 50 per cent of lending volumes and over 20 per cent of lending revenues, indicating strong potential for future expansion.

Near-Term Triggers and Positive Outlook

Bernstein also mentioned several near-term triggers for Paytm, including the potential restart of Paytm Payments Bank operations, a faster scale-up of BNPL, and stronger lending revenue backed by improved consumer credit demand. The report stressed that the company's margin improvement, stronger payments mix, and growth in financial services are the key factors shaping its positive outlook.

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