Fintech Tug-of-War: Paytm Shares Slip Despite Earnings Beat as Citi Pushes Higher While CLSA Stays Cautious

Fintech Tug-of-War: Paytm Shares Slip Despite Earnings Beat as Citi Pushes Higher While CLSA Stays Cautious​

Shares of One 97 Communications Ltd (Paytm) saw a slight decline in early trading on Tuesday, falling nearly 0.92 percent to Rs 1,335.10. This dip occurred even after the fintech giant reported a robust fiscal first quarter, marked by solid increases in net profit and revenue.

The stock had closed at Rs 1,347.5 on Monday, down marginally ahead of its earnings announcement. Despite the minor slip, Paytm remains a strong performer, having gained 4.4 percent so far in 2026. This performance contrasts sharply with the Nifty 50, which saw a 7.3 percent decline.

Q1 Earnings Reveal: Massive Growth in Revenue and Profit​

Paytm delivered impressive results for the quarter ended June 30, 2026. The company reported a 79 percent year-on-year rise in consolidated net profit, reaching Rs 220 crore. Revenue from operations also climbed significantly by 28 percent year-on-year to stand at Rs 2,448 crore.

Customer engagement metrics showed strong momentum across the board. Merchant Gross Merchandise Value (GMV) rose by 31 percent to Rs 7.1 lakh crore. Furthermore, customer UPI gross transaction value (GTV) surged a considerable 45 percent, hitting Rs 5.9 lakh crore. Monthly transacting users increased to 8 crore, with subscription plans adopted by merchants growing to 1.57 crore.

Citi Reaffirms Bullish Stance and Raises Target​

Citi maintained its 'Buy' rating on Paytm stock, citing the strong operational execution in Q1. The brokerage raised its target price significantly to Rs 1,560 per share, implying a potential upside of about 15.8 percent from Monday’s closing level.

Citi noted that Paytm’s Q1 EBITDA of Rs 200 crore was 16 percent ahead of estimates. This beat was attributed to lower cloud costs and robust merchant loan distribution activity. The firm highlighted the stability of the contribution margin at 55 percent during the quarter.

Looking forward, Citi stressed the importance of potential regulatory changes. They suggested that the introduction of a 5-7 basis point (bps) merchant discount rate (MDR) on large UPI merchants could improve net payment margins by 0.5 to 1 basis point. This policy shift, if implemented, could lift FY28 EBITDA estimates by 8 to 10 percent.

CLSA Remains Skeptical Amid Margin Moderation​

Conversely, CLSA retained an 'Underperform' rating for Paytm stock, setting a target price of Rs 1,050. This suggests a potential downside of about 22 percent from the current trading levels. While acknowledging EBITDA at Rs 200 crore slightly surpassed their estimate of Rs 190 crore, CLSA adopted a cautious tone regarding future growth drivers.

The brokerage noted that payments GMV accelerated to a 31 percent year-on-year rise, and financial services revenue improved into the mid-40 percent range. However, CLSA pointed out that payment take rates moderated to 8.3 basis points from 8.8 basis points in the previous quarter.

CLSA also mentioned that operating expenses benefited from lower doubtful debt provisions. This prompted the firm to trim its FY27-FY29 EBITDA estimates by 2 to 3 percent, anticipating higher operational costs moving forward. The brokerage noted limited upside given the recent rally around expectations of a UPI MDR policy return.