Paytm dips despite record EBITDA as board rejects bonus shares
Paytm's record quarterly profitability failed to lift its shares after the board rejected a bonus issue, exposing a deep split among brokerages over whether the stock's recent 33% rally has run its course.
One97 Communications fell 1.4% to ₹1,328.80 on Tuesday after the Paytm parent reported its strongest-ever quarterly earnings but declined to issue bonus shares. The board opted to prioritise business growth over shareholder rewards, a decision that tempered an otherwise sharp improvement in the company's financial profile.
For the quarter ended June, net profit rose 79% year-on-year to ₹220 crore. Excluding the impact of a government incentive, comparable profit after tax surged 207% to ₹212 crore. Revenue climbed 28% year-on-year to ₹2,448 crore, up 8% sequentially.
The revenue growth outpaced operating expenses to drive record EBITDA of ₹203 crore. On a comparable basis, EBITDA soared from ₹18 crore a year earlier as the margin expanded to 8% from 1%.
The margin expansion was powered by healthy growth in the high-margin payments and financial services divisions. Payment services revenue grew 33% to ₹1,384 crore, driven by higher merchant payment volumes.
Gross merchandise value growth accelerated to 31%, up from 27% in the prior quarter. The company attributed the momentum to product investments and strong traction in its online business following last year's payment aggregator licence. Paytm Payment Services has also applied for a wallet licence.
The results deepened a divide among analysts. Citi reiterated its 'Buy' rating and raised its target price to ₹1,560, noting that EBITDA beat estimates by 16% on lower cloud costs and stronger merchant loan distribution. The bank highlighted that a proposed merchant discount rate on large UPI transactions could lift FY28 EBITDA by up to 10%.
CLSA maintained its 'Underperform' rating with a target of ₹1,050, implying a 22% downside. While the quarter's EBITDA slightly beat its estimates, the brokerage trimmed its medium-term forecasts by 2-3%. It warned that lower doubtful debt provisions artificially boosted the quarter and that the recent rally leaves little upside.
The stock hit a 52-week high of ₹1,407 earlier this month and has gained 33% over the past year. Tuesday's pullback reflects a market attempting to price in whether Paytm's accelerating operating leverage can sustain its premium valuation without the catalyst of a bonus share issuance.
