Goldman Sachs, Morgan Stanley, BofA remain bullish on Paytm, as company reports high top line growth

Paytm, India’s leading digital payments and financial services, reported its Q3 FY2021 results on Friday night, where it saw its revenues grow by 89 per cent to Rs 1,456 crore.

The company’s income from payment services to merchants jumped by 117 per cent to Rs 585 crore, constituting 40 per cent of total revenues in the quarter ending December 2021 compared to the same quarter of the previous year. EBITDA losses reduced to Rs 393 crore, excluding a one-time ESOP expense cost of Rs 390 crore recorded in Q3 FY 2022 from the grant of 26.6 mn Employee Stock Option (ESOPs).

Paytm’s merchant base has grown to 24.9 million. This shows the adoption of Paytm’s services and has also translated into high engagement seen in its average Monthly Transacting Users of 64.4 million, along with its merchant payments-led GMV of Rs 2.5 lakh crore.

Lending continues to be a big growth driver for the company with total loans at 4.4 million in Q3 FY2021, aggregating to a total loan value of Rs 2,177 crore. In the Merchant loans category, the company reported a growth in the total value of loans disbursed to Rs 471 crore, up by 127 per cent, with an average ticket size of Rs 120,000-Rs 140,000. In the Personal Loans category, the company recorded a growth of 1,923 per cent to Rs 515 crore, with an average ticket size of Rs 80,000-Rs 90,000. In the booming Buy Now, Pay Later Category, Paytm Postpaid saw its total value of loans go up by 408 per cent to Rs 1,190 crore, with a presence at over 3.5 million online and offline merchants.

The company’s strong quarterly results were welcomed by top brokerages

Goldman Sachs

Stock Rating

Target Price

Upgrade to Buy

Rs 1460


Strong growth outlook; risk reward attractive

We believe Paytm’s strong topline growth of 89 per cent YoY in 3QFY22 will help allay investor concerns around declining payments take rate in recent years. Net take rate, or spreads, which is revenue less payment processing charges (PPC) as a proportion of GMV, has seen a sharp improvement from +2 bps in FY21 to +8 bps in 3QFY22.

We expect Paytm’s increase in scale to result in an improving margin trend, with the company reaching adjusted EBITDA breakeven by FY25E.

We also note that Paytm has a strong balance sheet (US$1.4 bn cash as of December ’21), and see limited likelihood of the company needing to raise capital again (US$210 mn annual cash burn).

Better than expected take rate and continued market share gains in payments vertical. Continued strong traction in lending, with new disclosures suggesting healthy performance of loan portfolio.

Cloud business tracking ahead of our expectations, led by advertising.

Key catalysts for growth include Approvals for the Raheja QBE transaction and an SFB (small finance bank) license.

Morgan Stanley

Stock Rating

Target Price


Rs 1425


A leading digital platform with attractive risk reward

PAYTM is a strong two-sided digital payments platform of merchants (>15 per cent market share in retail digital merchant payments) & customers (at 115mn annual transacting users, it has >40 per cent share in unique mobile payment users).

Having built a strong customer acquisition engine via payments, it is now rapidly expanding into financial services digitally at low incremental costs.

We expect revenues to rise at 66 per cent/44 per cent CAGRs over the next two/five years, reaching Rs176bn in F26. We expect contribution margins to improve to 42 per cent by F26, and the company to break even on EBIDTA in F25.


Stock Rating

Price Objective


Rs 1130


Solid operational quarter; sustaining the momentum is key

Paytm reported a strong set of revenue & adjusted EBITDA. Even disclosures improved. We expect a positive reaction on stock price.

Revenue from payment services to consumers/ merchants jumped 15 per cent/46 per cent qoq & overall the payments & financial services revenue was up 33 per cent qoq. Commerce/cloud biz revenues increased 61 per cent/28 per cent qoq and delivered a 37 per cent/20 per cent beat vs our estimates.

Revenue from operations grew 89 per cent yoy led by 1) increase in processing of merchant payments through MDR bearing instruments 2) increase in disbursements of loans on platform and 3) recovery of commerce business from Covid impact.




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