Jefferies Upgrades Paytm to 'Buy'; Shares Jump 3.5% After Q1 Results

Brokerage firm Jefferies has upgraded its rating on Paytm from ‘hold’ to ‘buy’, raising its target price, a day after the fintech major turned profitable in the first quarter of FY26.

With this, Paytm shares surged 3.5% to INR 1,090.00 on the BSE today, touching a fresh 52-week high. The stock opened at this price but later slipped to INR 1,019.35 apiece.

As of 12:30 PM, the stock was trading 1.8% higher at INR 1,072.15 on the BSE with a market capitalisation of INR 68,150.21 Cr.

Jefferies raised its target price for Paytm to INR 1,250 per share from INR 900 before, an upside of 19% from the previous closing price of INR 1,051 per share.

The brokerage noted that the company has rebounded strongly from previous regulatory and business setbacks by controlling costs and rebuilding growth momentum.

Paytm turned profitable in Q1 FY26, reporting a net profit of INR 122.5 Cr compared to a net loss of INR 840.1 Cr in the year-ago quarter. The company attributed the profitability to “AI-led operating leverage, a disciplined cost structure,” and higher other income.

Its revenue from operations rose 28% year-on-year to INR 1,918 Cr during the quarter, compared to INR 1,502 Cr in the same quarter last year.

In its note, Jefferies projected that Paytm’s EBITDA margin could improve from –22% in FY25 to +9% in FY27 and 14% in FY28, reflecting a significant turnaround in profitability.

“We raise EBITDA estimates for FY26-28, led by tad higher contribution margins/operating leverage. Upgrade to FY26 looks steeper due to some transitionary benefits, and upgrades to FY27-28 EBITDA are around 14-17%,” the brokerage firms said.

Jefferies is also expecting 24% net revenue CAGR growth in Paytm over FY25-28E, driven by a 32% growth in financial services and 24% growth in payment services during the same period.

The brokerage also highlighted that Paytm’s stock has risen ~20% in the last month as its business outlook has improved and there is potential for inclusion in MSCI indices, which could attract more institutional investment.

However, it noted that Paytm’s valuation still trades at a ~30% discount compared to PB Fintech.

Jefferies also outlined three potential future growth drivers for Paytm- securing approval for a Payment Aggregator (PA) licence, resuming and expanding its BNPL (Buy Now Pay Later) and wallet businesses and applying MDR (merchant discount rate) on UPI payments.

(The story will be updated soon.)

The post Jefferies Upgrades Paytm to ‘Buy’; Shares Jump 3.5% After Q1 Results appeared first on Inc42 Media.