Leading brokerage firm Bernstein has proposed that the best route for Paytm’s resurgence could be through an acquisition by a bank or a large non-banking finance company (NBFC). In a note accessed by the Economic Times, Bernstein highlighted how such a partnership could enable banks to leverage Paytm’s extensive customer base, ultimately driving growth and innovation within the financial sector.
According to Bernstein, a strategic acquisition of Paytm could empower banks looking to enhance their consumer-focused offerings by utilizing Paytm’s existing customer network to cross-sell non-banking products. This move, as the brokerage notes, would allow banks to introduce superior products to their users and roll out innovative credit solutions, such as credit lines on UPI, through Paytm’s established distribution base.
The brokerage firm also mentioned that a “large investment for a sizable stake from a major corporate house” could enable Paytm to revive its business operations more swiftly and mitigate potential future regulatory challenges.
Bernstein pointed out that prominent corporate entities like Reliance Jio, the Adani Group, and the Tata Group are already making strides in building fintech businesses in-house. “Such efforts can get a major boost through the acquisition of Paytm,” added Bernstein.
This recommendation comes on the heels of recent reports suggesting Paytm’s potential stake sale to the Adani Group—a claim that Paytm later refuted. Despite these denials, Bernstein’s insights reflect the growing speculation surrounding Paytm’s future.
Bernstein also provided an outlook on Paytm’s profitability, projecting that the fintech company, “in its current form,” is poised to achieve profitability by the fiscal year 2026-27 (FY27). The firm emphasized that rapidly scaling up secured lending operations and obtaining an 8-10 basis point share of the merchant discount rate on UPI payments above INR 2,000 could expedite profitability by FY26. Furthermore, Bernstein suggested that cutting costs more aggressively and reducing staff strength could narrow the profitability timeline even further.
In terms of stock performance, Bernstein has set a price target of INR 600 per share for Paytm, marking a potential 5% increase from the stock’s last close of INR 573.2 on the BSE as of Monday, August 19.
The brokerage’s note comes at a challenging time for Paytm, which has been grappling with a major crisis. Earlier this year, the Reserve Bank of India (RBI) prohibited Paytm’s profitable payments bank arm from conducting business activities, leading to significant operational disruptions and mounting losses.
For the second consecutive crisis-hit quarter, Paytm’s losses soared 134% year-on-year to INR 840.1 crore in Q1 FY25. Additionally, revenue from operations plummeted 36% to INR 1,502 crore in the same period, down from INR 2,342 crore in the corresponding quarter last year.
Bernstein attributed these losses to the adverse impact on Paytm’s banking operations and the government’s decision to reduce its budgetary allocation for digital payments. The Centre recently slashed the budgetary outlay for digital payments to INR 1,441 crore in the full Budget, a significant drop from the INR 3,500 crore allocated in the interim Budget announced in February.