New Delhi [India], September 10 : Global brokerage Bernstein has named Paytm a “Top pick”, citing merchant lending growth and operating leverage as the key drivers of its earnings growth, while maintaining its Outperform rating on the fintech major with a target price of ₹2,200.
In its latest report on One97 Communications, Bernstein said it sees a “clear right to win for Paytm and a long growth runway” in merchant lending. The target price of ₹2,200 implies a 26% upside from Paytm’s closing price used in the report.
Bernstein expects Paytm’s revenue to grow at a 24% CAGR between FY26 and FY30, supported by growth across payments and financial services. Over the same period, the brokerage expects EBITDA to increase from around ₹5 billion to around ₹70 billion, driven by operating leverage across the business.
Within financial services, revenue is expected to grow at around 27% CAGR during FY26 to FY30, driven largely by loan distribution. Bernstein expects merchant loan disbursals to increase from around ₹280 billion in FY26 to around ₹760 billion by FY30, implying a 28% CAGR over the period.
The report highlighted “attractive product market fit” in merchant loans, noting that around 55% of disbursals come from repeat borrowers. It also pointed to an “inherent risk management advantage”, saying the visibility of daily cashflows provides important data for underwriting the merchants and also provides early visibility to borrower stress. It added that Paytm’s ability to collect the repayments with “minimal opex” creates a competitive advantage versus traditional lenders.
Importantly, the brokerage said its merchant lending growth assumptions do not require a meaningful increase in penetration, with its forecasts driven primarily by growth in the underlying merchant base and ticket size expansion. It estimates merchant penetration to rise from around 8.4% to 12.9%, a relatively modest increase.
Paytm’s existing businesses are also expected to deliver “meaningful operating leverage”. Bernstein forecasts indirect expenses to grow at only around 8% CAGR, saying key cost drivers have peaked. It said technology costs should remain broadly stable, while moderating device additions should keep sales and merchant acquisition expenses in check.
Even without any potential MDR on UPI, Bernstein expects net payment processing revenue to grow at a 24% CAGR during FY26 to FY30, supported by healthy growth in card spends, rising RuPay card usage on UPI and Paytm’s market share gains in the acquiring business.
The brokerage also sees further upside from consumer transaction credit and non lending financial services, saying Paytm’s large consumer base and high engagement within the payments ecosystem provide a “natural advantage in customer acquisition and underwriting.”