Global brokerage Nomura has initiated coverage on One 97 Communications, the parent company of Paytm, with a Buy rating and a target price of ₹2,250 per share. The recommendation suggests potential upside of approximately 31%–33%, depending on the reference market price used. Nomura’s outlook rests on the potential for faster payments revenue, increased merchant lending, artificial intelligence-driven cost savings and new revenue streams as India’s digital payments market expands.
The brokerage expects Paytm’s earnings before interest, taxes, depreciation and amortisation (EBITDA) to grow at a compound annual growth rate (CAGR) of 96% between FY26 and FY29. It also sees potential benefits from merchant discount rates on eligible Unified Payments Interface (UPI) transactions, international expansion and Paytm’s enterprise AI product, Pi. However, these are analyst forecasts rather than guaranteed outcomes, and the investment case faces risks from competition, lending asset quality and the execution of new business initiatives.
Key Takeaways
- Nomura rating: Buy on Paytm’s parent company, One 97 Communications.
- Target price: ₹2,250 per share.
- Potential upside: Approximately 31%–33%, depending on the reference share price.
- Earnings outlook: Nomura projects 96% EBITDA CAGR between FY26 and FY29.
- Payments business: Gross merchandise value (GMV) is projected to grow at a 25% CAGR between FY25 and FY29.
- Merchant lending: Penetration among subscription merchants could rise from 8% to 11% by FY29.
- New opportunities: Potential UPI merchant discount rate revenue, international expansion and enterprise AI.
- Key risks: Deteriorating lending asset quality, competition and uncertainty around the timing of new revenue streams.
Why Nomura Is Bullish on Paytm
Nomura’s investment thesis centres on the possibility that Paytm can turn its large payments ecosystem into a more profitable business.
The company operates across digital payments, merchant services, financial distribution and technology products. Its payment infrastructure connects consumers, merchants and businesses, creating opportunities to generate revenue from multiple services rather than relying on a single product.
Nomura expects three main developments to support growth: expansion in the core payments business, increased lending to merchants and improved operating efficiency. It also identifies potential upside from new revenue sources that could become more significant over the next few years.
The brokerage’s target price reflects its expectations for Paytm’s future earnings and valuation. It should not be interpreted as a guaranteed future market price or as a consensus target shared by every analyst covering the stock.
1. Digital Payments Could Remain Paytm’s Core Growth Engine
Payments remain central to Paytm’s business model. The company provides payment acceptance infrastructure and related services to merchants, while consumers use its platform for digital transactions and other financial services.
Nomura expects Paytm’s GMV to grow at a CAGR of approximately 25% between FY25 and FY29. GMV represents the total value of transactions processed through a platform, not the revenue the company earns from those transactions.
The distinction matters because payment companies generally earn only a fraction of the total transaction value. Their revenue depends on transaction mix, merchant services, subscription products, processing arrangements and the applicable fee structure.
Nomura projects payment processing revenue to grow at a CAGR of 25% between FY26 and FY29. It also expects Paytm’s net payment margin, excluding merchant discount rate revenue, to improve from 4.03 basis points in FY26 to 5.26 basis points by FY29.
| Payments metric | Nomura’s projection |
|---|---|
| GMV CAGR, FY25–FY29 | 25% |
| Payment processing revenue CAGR, FY26–FY29 | 25% |
| Net payment margin, FY26 | 4.03 basis points |
| Net payment margin, FY29 | 5.26 basis points |
These figures are analyst estimates, not reported future results.
The projected improvement in payment margins suggests Nomura expects Paytm to earn more from its transaction ecosystem through a combination of better monetisation and changes in payment mix.
However, the company’s ability to achieve these projections will depend on transaction volumes, merchant retention, pricing, competition and the economics of individual payment products.
2. Merchant Lending Offers Room for Expansion
Merchant lending is another important part of Nomura’s investment thesis.
Paytm has a large base of merchants using its payment devices, software and other services. These relationships can help the company identify businesses that may need working capital or other financing products.
Nomura estimates that merchant lending penetration currently stands at approximately 8% of Paytm’s 15.7 million subscription merchant base. It expects that proportion to rise to 11% by FY29.
| Merchant lending metric | Current estimate | FY29 projection |
|---|---|---|
| Subscription merchant base | 15.7 million | — |
| Merchant lending penetration | 8% | 11% |
Source: Nomura estimates as reported in financial media.
The opportunity comes from offering more eligible merchants access to financing through Paytm’s lending relationships. Higher penetration could support additional distribution revenue and deepen the company’s relationship with merchants.
However, Paytm’s role in lending must be understood carefully. Its lending-related business can involve partnerships with regulated lenders rather than the company independently funding every loan. The revenue it earns depends on its arrangements with lending partners and the services it provides.
More lending activity also brings risks. If borrowers struggle to repay, lending partners could tighten eligibility criteria or reduce their exposure. Deteriorating asset quality could affect the availability of products, partner relationships and the economics of Paytm’s lending distribution business.
Nomura identifies asset quality as a key risk to its bullish outlook.
3. AI Could Help Paytm Reduce Its Cost Base
One of the most important parts of Nomura’s forecast is its expectation that Paytm will become more efficient as revenue grows.
The brokerage projects total indirect costs to decline from around 50% of revenue in FY26 to 34.1% by FY29. Employee costs are expected to fall from 30.7% of revenue to approximately 19.8% over the same period.
Technology costs are also projected to decline from 7.6% to 5.9% of revenue, while marketing expenses are expected to remain around 3% of revenue through FY29.
| Cost category | FY26 estimate | FY29 projection |
|---|---|---|
| Total indirect costs as a share of revenue | About 50% | 34.1% |
| Employee costs as a share of revenue | 30.7% | 19.8% |
| Technology costs as a share of revenue | 7.6% | 5.9% |
| Marketing costs as a share of revenue | — | About 3% |
Figures reflect Nomura’s forecasts. They are not confirmed future cost ratios.
Nomura sees AI-led efficiencies as a major contributor to the improvement. AI tools could help automate parts of field sales, merchant acquisition, customer support and commercial negotiations. Automation and better workflow management could allow Paytm to support a larger business without increasing costs at the same pace as revenue.
Economies of scale may also contribute. As transaction volumes and merchant adoption expand, the company could spread certain technology and operational expenses across a larger revenue base.
Nevertheless, lower costs as a percentage of revenue do not necessarily mean absolute spending will decline. A rapidly growing business can spend more in rupee terms while becoming more efficient relative to its revenue.
The forecast also depends on execution. Paytm will need to demonstrate that automation improves productivity without harming customer service, merchant acquisition or the quality of its operations.
4. UPI Merchant Discount Rates Could Add Revenue
Nomura also identifies the possible introduction of merchant discount rate (MDR) revenue on selected UPI transactions as a potential growth driver.
MDR is a fee associated with processing certain merchant payments. UPI payments made by individuals through bank accounts have generally been free, while the fee treatment of other payment categories depends on applicable rules and transaction types.
Nomura estimates that approximately 20% of Paytm’s GMV could qualify for MDR at an indicative rate of around 8 basis points. Based on its assumptions, the brokerage estimates potential additional revenue of ₹500 crore in FY28 and ₹620 crore in FY29.
These figures are forecasts based on a possible fee framework, not revenue that Paytm has already secured. Any change to UPI pricing would depend on policy decisions, payment-industry arrangements and the transactions that ultimately qualify.
The opportunity could be meaningful because even a small fee applied to a large transaction base can generate additional revenue. But investors should distinguish this potential source of income from Paytm’s existing payments business.
5. International Expansion and Enterprise AI Could Support Long-Term Growth
Nomura sees two additional opportunities: expanding Paytm’s technology and payments services internationally, and growing its enterprise AI business.
The international strategy is expected to rely on licensing arrangements, partnerships and selected directly operated ventures. Such an approach could allow Paytm to use technology and operational experience developed in India without necessarily building a large physical presence in every market.
However, Nomura expects a meaningful earnings contribution from international expansion only from FY30. That makes it a longer-term opportunity rather than a major near-term earnings driver.
Paytm has also launched Pi, an enterprise AI product aimed at banks and insurers. Financial institutions have potential uses for AI in customer support, document processing, internal workflows and other business operations, although adoption depends on reliability, data protection, compliance and integration requirements.
Both opportunities could broaden Paytm’s business beyond conventional payments. Their contribution will depend on commercial adoption, execution and the ability to generate revenue at sustainable margins.
What Does the ₹2,250 Target Mean for Investors?
Nomura’s ₹2,250 target price implies potential upside of around 31%–33% from the market reference price used in the report.
That estimate is a projection, not a promised return. Share prices can move in response to market conditions, quarterly results, regulatory developments, competition and changes in investor expectations.
Nomura expects EBITDA to grow at a 96% CAGR from FY26 to FY29. Such a high growth rate reflects expectations for a substantial improvement from the starting base, including the effects of revenue growth and operating leverage.
The brokerage values Paytm at approximately 26 times its estimated FY29 enterprise value to EBITDA. This is a forward-looking valuation measure, meaning it depends on the company’s ability to deliver the earnings expected several years into the future.
If revenue growth is slower than forecast, costs remain elevated or new revenue opportunities fail to materialise, the valuation could come under pressure. Conversely, stronger-than-expected payments growth and margin improvement could support the investment case.
Investors should therefore evaluate the underlying assumptions rather than focusing only on the headline target price.
Key Risks That Could Challenge Nomura’s Forecast
The bullish outlook is not without risks.
First, competition in digital payments remains intense. Paytm competes with other payment apps, banks and merchant-service providers. Strong competition can affect pricing, merchant retention and the cost of acquiring new users.
Second, merchant lending depends on borrower quality and the willingness of lending partners to provide credit. A deterioration in repayment performance could reduce lending activity or affect the economics of distribution arrangements.
Third, projected cost efficiencies require execution. AI adoption may reduce some operational expenses, but implementation costs, employee training and technology investment can offset part of the savings.
Finally, the potential revenue from UPI MDR and international expansion remains uncertain. These opportunities should not be treated as guaranteed contributions to future earnings.
The Bigger Picture
Nomura’s Buy rating reflects the possibility that Paytm can combine payments growth, wider merchant lending and operating leverage to improve its financial performance. The brokerage’s forecasts point to a business that could become more profitable as revenue expands and indirect costs decline relative to sales.
The investment case also relies on opportunities that remain uncertain, including potential UPI MDR revenue, international expansion and enterprise AI. Paytm will need to deliver on its operating targets while managing competition and lending-related risks. The ₹2,250 target price is therefore best understood as Nomura’s view of the company’s potential under its assumptions, rather than a guaranteed outcome.
Looking Ahead
Investors will watch Paytm’s quarterly results for evidence of sustained payments growth, higher merchant lending penetration and improving cost ratios. Progress against these indicators will help show whether the company is moving toward the earnings trajectory forecast by Nomura. Developments around UPI pricing and the commercial adoption of Pi could also influence the outlook.
For now, the Buy rating puts Paytm’s potential earnings growth back in focus, but the stock’s performance will ultimately depend on reported results and market expectations. Investors should consider the valuation, risk factors and their own financial circumstances before making a decision based on any single brokerage recommendation.
Frequently Asked Questions
1. What rating has Nomura given Paytm?
Nomura has initiated coverage on One 97 Communications, Paytm’s parent company, with a Buy rating.
2. What is Nomura’s target price for Paytm?
The brokerage has set a target price of ₹2,250 per share, implying approximately 31%–33% potential upside depending on the reference market price.
3. How fast does Nomura expect Paytm’s EBITDA to grow?
Nomura projects EBITDA to grow at a compound annual growth rate of 96% between FY26 and FY29.
4. What are the main growth drivers in Nomura’s report?
The main drivers are digital payments, merchant lending, AI-led cost efficiencies, potential UPI MDR revenue, international expansion and the enterprise AI product Pi.
5. What are the main risks to Paytm’s outlook?
Key risks include intensifying competition, deteriorating lending asset quality, execution challenges and uncertainty around potential new revenue streams.
6. Does the Buy rating guarantee that Paytm will reach ₹2,250?
No. The target is an analyst forecast based on assumptions about future earnings and valuation. The share price may rise or fall, and investors can lose money.
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