Target: ₹1,050

CMP: ₹858.25

We upgrade One97 Communications (Paytm) to Buy from Add with revised DCF-based TP of ₹1,050 (earlier ₹750), implying FY27E EV/Op Rev at 4.5x and P/BV at 4.2x. Recent NPCI approval (Oct-24) released a major regulatory overhang, which should help it rebuild the MTU base in the next 12-18M and thus cross-sell retail financial products like loans (for example HL), insurance, and wealth products, thereby improving revenue per user.

This, coupled with continued strong traction in merchant device subscription revenue, rising share of UPI on CC with MDR, accelerating merchant loan business with a better take rate, continued cost optimization, and rising non-operational income (including treasury income on proceeds from recent stake sale in the entertainment business/PayPay Corp) should put Paytm on the early path to profitability by FY26E, with acceleration thereafter.

Paytm’s Cash/MCap stands at 21 per cent vs 5 per cent for Zomato, which we believe, provides strong margin of safety and can be used to accelerate business organically/inorganically or even reward shareholders via dividend/buy-back. Additionally, further easing of regulatory stance via potential approval for payment aggregator license could be a positive catalyst.