ICICI Securities has lifted its target price for One 97 Communications to ₹1,945, citing improved operational efficiency. The brokerage expects strong growth in financial services revenue, though investors remain focused on the company's ability to maintain margins amidst stiff competition in the digital payments space.
ICICI Securities has increased its target price for One 97 Communications to ₹1,945 from the previous ₹1,498. This revision follows recent performance trends in the company's payment and financial services segments, which suggest a shift toward more profitable growth.
The brokerage highlighted the concept of operating leverage as a key driver for the firm. In simple terms, this means that the company’s revenue from financial services is growing significantly faster than its fixed costs. Specifically, during the first half of the current financial year (H1 FY27), revenue from these services rose by 47.3%, while fixed costs increased by only 9.8%. This gap indicates that the company is becoming more efficient as it scales its operations, helping to improve its bottom line.
For investors, this outlook marks a notable period in the company’s recovery. Following major regulatory actions by the Reserve Bank of India in early 2024, which impacted its payments banking subsidiary, One 97 Communications has undergone a structural reorganization. The company has since focused on prioritizing high-margin financial products and strictly managing operational expenses to stabilize its business model. Analysts at ICICI Securities now project that the company’s Gross Merchant Value—the total value of payments processed—will grow at an annual rate of 26% between FY26 and FY28. This growth is expected to be supported by new artificial intelligence-based services and international payment initiatives.
Despite the positive outlook, the digital payments sector in India remains highly competitive. Paytm operates in a market dominated by large players like PhonePe and Google Pay, which command significant shares in the UPI ecosystem. A critical metric for investors to watch is the "take rate," which is the percentage of transaction value that Paytm retains as revenue. The brokerage anticipates this rate will hold steady at approximately 8.8 basis points through the end of FY28, but achieving this depends on sustaining demand for the company’s loan and payment products.
The company’s path ahead carries risks related to its regulatory compliance and intense market competition. Any shift in the regulatory environment or a slowdown in the adoption of its financial products could pressure profit margins. Investors may track the upcoming quarterly earnings to verify if the growth in financial services revenue and the discipline over fixed costs continue as expected. Monitoring management’s strategy to differentiate itself from larger competitors will also be important for gauging long-term stability.