Paytm Core Business Momentum Intact Despite PIDF Incentive Impact: Jefferies

Incentive Discontinuation Triggers Estimate Revisions​

Paytm continues to deliver strong core business momentum despite a near-term earnings impact from the non-renewal of the Payments Infrastructure Development Fund scheme, according to a report by Jefferies.

The report notes that the discontinuation of PIDF incentives has led to a reduction in adjusted EBITDA estimates and a cut in the price target.

PIDF Income Removed From Forward Projections​

During FY25 and the first half of FY26, Paytm earned meaningful incentive income under the scheme, including Rs 1.28 billion in 1HFY26, which contributed materially to adjusted EBITDA. With the scheme not extended beyond December 2025, Jefferies has removed this incentive income from its forward estimates.

As a result, adjusted EBITDA projections for FY27 and FY28 have been lowered. However, Jefferies emphasises that the impact is incentive-driven and not a reflection of weakness in Paytm’s underlying operations, leading the brokerage to retain its Buy rating on the stock.

Core Payments And Financial Services Remain Strong​

Jefferies highlights that Paytm’s core payments and financial services businesses continue to see healthy traction. Revenue is expected to grow at a compound annual rate of around 23 per cent between FY26 and FY28, driven primarily by growth across payments and financial services.

Contribution margins are projected to remain stable at about 58 per cent during this period.

Operating Leverage To Drive Profitability​

The report points to operating leverage as a key profitability driver, with adjusted EBITDA margins expected to improve steadily to nearly 17 per cent by FY28. Net profit is also projected to scale meaningfully as revenue growth and margin expansion play out over the medium term.

Partial Offsets Assumed For Incentive Loss​

Jefferies notes that offsetting the loss of incentive income will require focused execution, including higher device subscription fees, improved take rates on non-UPI merchant payments, and tighter cost controls. The brokerage has built in conservative assumptions, factoring in only partial offsets rather than a full recovery of the discontinued incentive income.

Buy Rating Maintained​

Despite earnings revisions and a lower price target, Jefferies reiterates that Paytm’s business fundamentals remain strong. Improving profitability, stable unit economics, and a strong balance sheet continue to support the company’s medium-term growth outlook, underpinning the maintained Buy recommendation.