Motilal Oswal has maintained a neutral rating on One 97 Communications (Paytm) with a price target of ₹1,850. While revenue rose 28% year-on-year to ₹26.5 billion, the company reported a profit miss due to higher-than-expected costs and taxes. Investors are focusing on the firm’s ability to balance revenue growth with profitability.
Brokerage firm Motilal Oswal has kept its 'Neutral' rating on One 97 Communications, the parent company of Paytm, with a target price of ₹1,850. This decision follows the company's latest quarterly results, where net profit fell short of brokerage expectations by 18 percent.
One 97 Communications reported a net profit of ₹2.25 billion for the period, which was lower than the anticipated ₹2.7 billion. According to the brokerage, this shortfall was driven by higher-than-expected indirect expenses and tax obligations. While these costs weighed on the bottom line, the company’s revenue performance remained resilient. Total revenue grew by 28 percent year-on-year to ₹26.5 billion, an 8 percent increase compared to the previous quarter.
Despite the profit miss, the company showed growth in several core operational areas. Management noted that the expansion of the merchant base and increased transaction volumes contributed to the top-line performance. The steady adoption of device subscription services and improved payment margins also served as supporting factors during the quarter. However, the Gross Merchandise Value (GMV)—a key metric for digital payment volume—remained flat on a sequential basis, indicating that transaction volume growth is stabilizing.
Looking ahead, a key area for investors to track is the potential impact of changes to the Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions. The MDR is the fee merchants pay for processing digital payments, and regulatory shifts in this area could affect the company’s future revenue and profit margins. Analysts at Motilal Oswal have factored these risks into their long-term earnings model.
The brokerage projects the company's profit after tax to reach ₹10.4 billion by the 2027 fiscal year and potentially rise to ₹26.5 billion by the 2028 fiscal year. The current price target of ₹1,850 is based on a valuation of 38 times the estimated Enterprise Value to EBITDA for the 2028 fiscal year. Going forward, investors will likely monitor how effectively the company can control its operational spending while continuing to grow its core payment and financial services business in a competitive market environment.