Motilal Oswal Reiterates Neutral Stance on Paytm Amid Strong Operational Growth

Motilal Oswal has released a research report on One 97 Communications, the company operating Paytm. The report highlights that Paytm's adjusted net profit significantly surpassed expectations, reaching INR 2.1 billion compared to an estimated INR 1.3 billion. This indicates strong performance from the company's core operations.

However, the reported Profit After Tax (PAT) was considerably lower, at INR 210 million. This was due to a substantial one-time impairment charge of INR 1.9 billion, which was recognized on a loan extended to its joint venture, First Games. Despite this one-time expense, Paytm's revenue demonstrated robust growth, increasing by 24% year-on-year and 8% quarter-on-quarter to INR 20.6 billion, exceeding analysts' estimates. This revenue growth was fueled by healthy trends across both the payments and financial services segments.

Outlook Based on its analysis, Motilal Oswal has set a valuation target of INR 1,200 for Paytm. This valuation is derived using a multiple of 22 times estimated EBITDA for the fiscal year 2030, discounted to the fiscal year 2027, which translates to a price-to-sales ratio of 8.2 times for FY27. The brokerage firm has reiterated its 'Neutral' rating on the stock, suggesting it believes the shares are fairly valued at current levels and may not experience significant short-term directional moves.

Impact This report provides investors with an updated view on Paytm's financial health and future prospects. The strong operational performance is positive, but the one-time impairment highlights potential risks in associated ventures. The reiterated neutral rating suggests caution for potential investors, indicating that while the company is performing operationally, significant upside might not be immediate. The INR 1,200 valuation provides a target price for investors to consider. Rating: 6/10

Difficult Terms: Adj. net profit: Adjusted net profit is the company's profit after deducting all expenses, but with certain one-time or unusual items excluded to give a clearer picture of ongoing operational performance. PAT: Profit After Tax is the company's net profit after all taxes have been deducted. Impairment: An accounting term meaning a reduction in the book value of an asset when its recoverable amount falls below its carrying amount on the balance sheet. In this case, the loan to JV First Games is considered less valuable. JV: Joint Venture is a business arrangement where two or more parties agree to pool their resources for the purpose of accomplishing a specific task. Revenue: The total income generated by a company from its primary business operations, usually from the sale of goods and services. YoY: Year-on-Year, comparing a metric from one period to the same period in the previous year (e.g., Q2 2025 vs. Q2 2024). QoQ: Quarter-on-Quarter, comparing a metric from one quarter to the previous quarter (e.g., Q2 2025 vs. Q1 2025). EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. It's a measure of a company's operating performance before accounting for financing and capital decisions. FY30E: Fiscal Year 2030 Estimates. Projections for the company's financial performance in the fiscal year ending in 2030. FY27E: Fiscal Year 2027 Estimates. Neutral rating: A stock recommendation from an analyst suggesting that the stock is expected to perform in line with its peers or the broader market, neither a strong buy nor a strong sell.