Paytm‘s share price was in the black on Thursday after the company after the government approved the company’s downstream investment into the payments vertical.

The Paytm Analyst: Analysts at Ventura initiated coverage on the stock with a “buy” rating and a 24-month target price of ₹1,170. The target indicates around 117% upside from the stock’s last closing price of ₹538.

The Paytm Thesis: The brokerage firm said that despite the Reserve Bank of India’s (RBI) regulatory actions on Paytm Payments Bank, Paytm’s business model remains robust, boasting technology that is considered “the gold standard.”

The analysts highlighted Paytm’s extensive merchant base of 4.07 crore across India and 7.8 crore monthly transacting users (MTUs) creates a strong ecosystem that drives recurring revenue streams. The growing popularity of UPI as a digital payment method and the widespread adoption of Paytm's soundbox and point-of-sale devices position the company to capitalise on this trend.

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Over the FY24-27 period, Ventura anticipates that Paytm's revenue, contribution profit and pre-employee stock options EBITDA will grow at a compound annual growth rate of 14.1%, 15.6%, and 54.5%, respectively, reaching ₹14,531 crore, ₹8,301 crore, and ₹1,829 crore by FY27.

It projects post-ESOP EBITDA and net earnings to turn profitable, with estimates of ₹1,379 crore and ₹1,388 crore, respectively, by FY27, compared to losses in FY24.

This growth is expected to be driven by an increase in gross merchandise value from payment services and devices, a more than fourfold growth in loan disbursals and a doubling of revenues from marketing services like ticketing and vouchers. The resumption of services such as the Paytm Wallet, FASTag, buy now, pay later and house rental payments once the RBI's restrictions are lifted, will also contribute to growth, the brokerage said.

Ventura highlights that Paytm's ability to adapt to regulatory changes, leverage its technology and maintain strong relationships with merchants and MTUs will be crucial for sustained growth.

Price Action: Paytm’s share price climbed down from early highs to trade 0.73% higher at ₹541.95 at the time of writing on Thursday.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.