Global brokerage Citi has increased its target price for One 97 Communications (Paytm) to ₹1,940, citing growth in lending and financial services. While the company recently reported a net profit of ₹225 crore, investors continue to monitor regulatory compliance and fierce competition in the digital payments space.
Global brokerage firm Citi has revised its target price for One 97 Communications, the parent company of Paytm, to ₹1,940. This update follows a reported improvement in the company’s financial services division and an overall expansion in profit margins. The brokerage expects that Paytm’s strategy of selling loans and credit services to its existing merchant and user base will be a key driver for future earnings.
Financial data indicates that Paytm has scaled its operations significantly, with monthly transacting users reaching 8.5 crore. The company has also expanded its infrastructure, deploying 1.6 crore payment devices across its merchant network. Revenue from financial services grew by 49% year-on-year, reaching ₹912 crore. For the recent September quarter, the company reported a net profit of ₹225 crore, with an EBITDA margin of 10%.
Despite the positive shift toward profitability, the company operates in a sector that requires strict adherence to regulatory standards. Investors typically track the company’s relationship with regulators, specifically recalling past challenges related to the Paytm Payments Bank subsidiary. Compliance with Reserve Bank of India (RBI) guidelines remains a foundational element for the company’s long-term stability and is a constant monitorable for shareholders.
The brokerage anticipates potential margin improvements in the future, citing the possibility of implementing merchant discount rates on Unified Payments Interface (UPI) transactions. Projections suggest this could add approximately ₹900 crore to the bottom line by fiscal year 2028. Additionally, the firm is investing in artificial intelligence to manage risk and streamline loan underwriting, which the brokerage believes could push EBITDA margins toward 21% over the same period.
However, the digital payments sector remains highly competitive. Paytm faces pressure from other major UPI apps and payment service providers, which affects market share and transaction pricing. The company’s ability to maintain its current momentum depends on factors like steady loan demand, the quality of its loan book, and its success in navigating sector-specific regulations. Investors may track future updates on UPI monetization policies, loan distribution growth, and any communications regarding regulatory compliance to assess the sustainability of these profit projections.