New Delhi, July 24: JM Financial, a brokerage firm, has reported that artificial intelligence (AI) based automation is becoming a key factor in enhancing Paytm’s cost efficiency. This advancement has allowed the company to maintain its expenses nearly stable despite rapid growth.
The brokerage described Paytm’s first-quarter results for the fiscal year 2026-27 as “another quarter of strong performance,” noting that the company’s profits exceeded their expectations.
This improvement comes at a time when the company continues to invest in merchant and consumer acquisition.
According to JM Financial, AI-based automation is establishing a structural foundation for cost efficiency in collections, customer service, and merchant acquisition, resulting in non-sales overhead costs remaining almost constant.
The brokerage also highlighted that Paytm’s financial services distribution business is emerging as its fastest-growing growth engine. In the first quarter of fiscal year 27, revenue from this segment surged by 45% year-on-year, reaching ₹814 crore, driven by robust growth in merchant and consumer lending distribution.
The report indicates that the largest contribution to profits from financial services still comes from merchant lending.
Paytm is now collaborating with double-digit lending partners, and new partnerships are rapidly expanding. More than 50% of merchant lending comes from repeat borrowers.
JM Financial stated that Paytm’s available lending capital is four to six times its current loan distribution capacity. This ensures there are no funding constraints, providing ample room for the company to enhance its loan distribution. The company continues to operate on a net distribution model, taking no loan risks and not holding any loan book.
Strong growth has also been recorded in the consumer lending sector, with the number of financial services customers increasing by 36% year-on-year.
The report notes that due to a strong product-market fit, Paytm Postpaid is growing at nearly double the pace compared to its previous cycle. JM Financial estimates that from fiscal year 2027-28, Postpaid will significantly contribute to revenue and EBITDA, although its current monthly business is below ₹1,000 crore.
The brokerage indicated that margin trading facilities (MTF), broking, and mutual fund distribution are emerging as the next strategic growth pillars for the company.
JM Financial expects that between fiscal years 26 and 29, revenue from financial services will grow at a compound annual growth rate of 29%.
The payments business also showed continued strength, with Paytm’s revenue increasing by 28% year-on-year, while gross merchandise value (GMV) rose by 31%. This growth was attributed to strong performance across offline, online, and consumer payments.
Revenue from payment services grew by 33% year-on-year. Additionally, due to the increasing share of card-on-UPI and postpaid transactions, payment processing margins structurally improved, surpassing 4 basis points.
According to the report, the reported EBITDA margin increased by 247 basis points to 8.3% compared to the previous quarter. The company’s profit was 18% higher than the brokerage’s estimate, primarily due to strong operating leverage and slower growth in indirect expenses relative to revenue.
The report stated that the company’s management is now more confident than before in achieving the target of a 15-20% EBITDA margin ahead of schedule, with the potential for long-term structural margins to be even higher.
Considering the rapid operating leverage, JM Financial has raised its EBITDA estimates for fiscal years 27 to 29 by 1 to 17%. It has maintained its ‘buy’ rating on Paytm while increasing the target price from ₹1,490 to ₹1,500. The brokerage’s valuation is based on an estimated EBITDA of 40 times for fiscal year 28.
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