New Delhi, July 24 (SocialNews.XYZ) Brokerage firm JM Financial has said AI-led automation is emerging as a structural driver of Paytm's cost efficiency, helping the company hold costs broadly flat even as growth has accelerated.
It has also called Paytm’s Q1 FY27 results as a ‘another quarter of strong execution’ with profits ahead of estimates
The improvement came despite continued investment in merchant and consumer acquisition.
JM Financial cited AI-led automation across collections, customer servicing and merchant acquisition as a structural driver towards cost efficiency, with non-sales overheads staying broadly flat.
The brokerage also stated that Paytm’s financial services distribution business is emerging as its ‘fastest-growing flywheel’, with revenue rising 45 per cent year-on-year to Rs 814 crore in the first quarter of FY27, anchored by strong growth in merchant and consumer lending distribution.
Merchant lending remains the largest contributor to financial services profits, JM Financial said.
Paytm now works with double digit lending partners, with newer partnerships ramping up well, while repeat borrowers account for over 50% of the merchant lending mix.
Available lending capital is four to six times Paytm's current disbursement levels, the brokerage said, removing funding constraints and giving the company room to expand loan distribution. Paytm continues to operate a pure distribution model, without taking lending risk or maintaining a loan book.
Consumer lending also grew strongly, with financial services customers rising 36 per cent year-on-year.
Further, Paytm Postpaid is scaling at nearly twice the pace of its previous cycle on strong product-market fit, according to the report. JM Financial expects Postpaid to become a meaningful revenue and EBITDA contributor from FY28, though monthly volumes remain below Rs 10 billion.
Wealth management, including the Margin Trading Facility, broking and mutual fund distribution, is emerging as the next strategic growth pillar.
The brokerage expects financial services revenue to grow at a compound annual rate of 29 per cent between FY26 and FY29.
The momentum extended across payments. Paytm's revenue rose 28 per cent year-on-year while gross merchandise value (GMV) grew 31 per cent, driven by broad-based strength across offline, online and consumer payments.
Payment services revenue grew 33 per cent year-on-year, and payment processing margin improved structurally to above 4 basis points on a richer mix of card-on-UPI and Postpaid transactions.
Reported EBITDA margin expanded 247 basis points sequentially to 8.3 per cent, and profit came in 18 per cent ahead of the brokerage's estimate, aided by strong operating leverage as indirect costs grew meaningfully slower than revenue.
Management is now more confident of reaching its 15–20 per cent EBITDA margin target earlier than previously guided, the report said, with the long-term structural margin seen meaningfully higher.
JM Financial raised its FY27–29 EBITDA estimates by 1 per cent to 17 per cent to reflect the faster-than-expected operating leverage. It reiterated its Buy rating and raised its target price to Rs 1,500 from Rs 1,490, valuing Paytm at 40 times FY28 estimated EBITDA.
Source: IANS
Gopi Adusumilli is a Programmer. He is the editor of SocialNews.XYZ and President of AGK Fire Inc.
He enjoys designing websites, developing mobile applications and publishing news articles on current events from various authenticated news sources.
When it comes to writing he likes to write about current world politics and Indian Movies. His future plans include developing SocialNews.XYZ into a News website that has no bias or judgment towards any.
He can be reached at gopi@socialnews.xyz
This website uses cookies.
