Shares of One97 Communications, the parent firm of Paytm, were gaining strongly on Tuesday after the fintech major won a bullish call from a global brokerage.

What Happened: Global brokerage firm UBS said it was optimistic about Paytm’s robust top-line compound annual growth rate (CAGR) of 54% over FY21-24.

The brokerage attributed this expected growth to Paytm’s core payment business and monetisation of device and loan origination. The improved profitability dynamics have led UBS to forecast Paytm reaching breakeven on EBITDA in FY25 and achieving an EBITDA margin by FY28.

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Encouraged by the anticipation of strong growth, UBS initiated coverage on Paytm with a “buy” rating and set a target price of ₹900 for the stock, representing a potential upside of over 26% from the closing price on January 15.

A Key Trigger: UBS sees the EBITDA breakeven as a key re-rating trigger for Paytm, aligning with the trend observed in other new-age companies like Zomato, where investors prioritise profitable growth over pure growth.

Paytm has established itself as a payment leader with strength across merchants and customers, holding a 25% industry gross merchandise value (GMV) share in its omnichannel payment business, the brokerage said. Additionally, the company’s top-of-the-funnel payment business has accelerated monetisation across merchant devices and loans, it added.

UBS forecasts an overall revenue CAGR of 21% for Paytm in FY24-28. The brokerage also emphasised Paytm’s discounted valuations compared to global and Indian peers, indicating favorable prospects for the company.

Price Action: Paytm’s shares were flying 4.1% to ₹743.45 around noon on Tuesday.

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