New Delhi [India], October 27 : Paytm’s large customer and merchant base and high repeat usage give it a strong competitive advantage and underpin its long-term profitability potential, according to global brokerage Citi. The brokerage sees these strengths, alongside accelerating financial services growth and improving payment margins, supporting Paytm’s earnings outlook even before the potential benefits of UPI merchant discount rate (MDR) take effect. 
In a note dated October 27, Citi reiterated its Buy rating on One 97 Communications, which operates Paytm, and raised its target price to ₹1,940 from ₹1,560. Paytm’s huge customer and merchant base, repeat usage and the barriers it creates for competition give the company “substantial moat and profitability,” according to global brokerage Citi. In an October 27 report titled “Solid Growth and Margins Uptick Ahead of MDR Slingshot,” Citi maintained its Buy rating on One 97 Communications Limited, the company that operates Paytm, following its September quarter results.
Citi said Paytm’s key edge is its first mover advantage on both sides of the payments ecosystem, which gives it “a solid customer acquisition engine for other financial services” such as loan distribution and credit cards. The brokerage added that Paytm has “several existing and emerging levers” to drive platform stickiness, such as consumer offerings, brand recall and its merchant footprint, including devices, and to improve overall profitability through financial services and fixed costs control.
Paytm’s network continued to expand during the quarter. Monthly transacting users rose by 50 lakh to 8.5 crore, while the company added about 7 lakh devices, taking its deployed device base to over 1.6 crore. Registered merchants grew to 5.2 crore. Citi also highlighted a repeat rate of over 50% among merchant borrowers.
Citi said Paytm “is seeing growth acceleration in financial services and improvement in net payment margins.” Financial services revenue rose 49% year-on-year (YoY) to ₹912 crore, accelerating from 45% in the previous quarter and ahead of Citi’s estimate of 44%. Key financial services customers grew 35% to 8.8 lakh, supported by repeat borrowing, AI led underwriting and lender expansion. Net payment margins rose 0.5 basis points sequentially to 9 basis points, ahead of Citi’s estimate of 0.3 basis points.
Paytm reported revenue of ₹2,648 crore in Q2 FY27, up 28% YoY, while EBITDA rose 90% to ₹270 crore, taking the EBITDA margin to 10%. Profit after tax stood at ₹225 crore. Citi noted that EBITDA was 4% ahead of its estimate.
Citi expects Paytm’s reported net profit to cross ₹3,000 crore in FY28, from ₹552 crore in FY26. It raised its FY28 EBITDA estimate by 39% and reported net income estimate by 28%, and expects EBITDA margins to rise to 12% in FY27 and 21% in FY28, with top line growth of 29% CAGR over FY26 to FY28. Citi also noted management’s guidance of an approximately 2.5 basis point uplift in payment processing margins from UPI merchant discount rate (MDR), which it estimates at around ₹900 crore in FY28.
The brokerage added that AI remains a key strategic focus for Paytm, deployed across merchant acquisition, customer engagement, lending, collections, risk management and software development. The company has also started commercialising selected AI capabilities for enterprise customers. 
Citi raised its target price to ₹1,940 from ₹1,560, saying it expects that Paytm’s “growth and margins have significant upside potential beyond FY28E.”