New Delhi, Jan 26 (PTI) Concerns around the status of the Payment Infrastructure Development Fund (PIDF) incentive appear exaggerated and premature, according to a company update by JM Financial Institutional
Securities on One 97 Communications.
Paytm’s stock witnessed a sharp single day correction following references in a recently filed DRHP by a private player highlighting that PIDF incentives have not yet been renewed.
However, JM Financial notes that while the scheme was due for renewal in December 2025 and has not been extended yet, there is still no official communication from the Reserve Bank of India.
The report adds that the document does not mention or suggest any scenario predicting the termination of the scheme.
Considering the sharp 9.5 per cent single day correction, JM Financial believes the market reaction was premature, especially as the firm had already factored in a permanent termination of PIDF incentives in its estimates.
The report explains that even in a worst case scenario assuming complete discontinuation of PIDF incentives, Paytm is expected to pursue significant offsetting measures that would dilute the impact meaningfully. While the gross impact of PIDF incentives could be around Rs 2.6 billion (Rs 260 crore) and Rs 2.3 billion (Rs 230 crore) in FY27 and FY28, respectively, JM Financial expects the net EBITDA impact to be substantially lower due to cost and revenue levers available to the company.
According to the report, Paytm and its peers are likely to go slow on device deployment at smaller merchants who are unlikely to enable other monetisation channels such as lending and data insights.
Additionally, the company is expected to undertake a subscription price hike for payment devices, along with the introduction of one time installation or setup fees.
These measures, combined with lower deployment costs, reduced sales and marketing expenses, and lower depreciation, are expected to cushion the overall impact.
As a result, JM Financial estimates that the net revenue impact would be limited to around 2.6 per cent in FY27 and 2.2 per cent in FY28, while the EBITDA impact would be restricted to Rs 1.6 billion (Rs 160 crore) and Rs 1.3 billion (Rs 130 crore), respectively. This implies an EBITDA decline of just 10.7 per cent in FY27 and 4.9 per cent in FY28 compared to earlier expectations.
The report further highlights that Paytm has demonstrated a strong return on investment driven approach in the past, citing the sharp reduction in consumer marketing efforts in FY25 and the first half of FY26 following the wallet pause. JM Financial believes the company would continue to remain RoI driven, thereby keeping profitability largely intact.
Despite reducing PIDF incentives to nil in its forecasts, JM Financial continues to estimate that Paytm will deliver Rs 25.9 billion (Rs 2,590 crore) of EBITDA in FY28. The company is also expected to grow revenues at approximately 25 per cent CAGR and triple EBITDA over the next two years.
On valuations, the report notes that at the current market price following the recent correction, Paytm trades at an attractive valuation of approximately 23 times FY28 estimated EV to EBITDA.
JM Financial reiterates its BUY recommendation and has revised its March 2027 target price to Rs 1,740, valuing the company at 40 times FY28 estimated EBITDA. This implies an upside of approximately 53 per cent from current levels.
The report concludes that after assuming discontinuation of PIDF incentives and incorporating offsetting measures, the impact on Paytm’s long-term financial trajectory remains relatively muted.
Revenue cuts over FY26 to FY28 are estimated at only 0.5 to 3 percent, while EBITDA impact is expected to be limited due to lower sales and marketing spends and more targeted sales efforts. PTI MKT TRB TRB TRB
