Paytm shares get an upgrade from Citi but target remains well below IPO price

Brokerage firm Citi has upgraded shares of One97 Communications, parent company of payments aggregator Paytm to “buy” from its earlier rating of “sell.”

Citi has also increased its price target on Paytm by more than 100% to ₹900 from ₹440 earlier. The revised price target from Citi implies a potential upside of 22% from Wednesday’s closing levels.

The brokerage wrote in its note that the regulatory risks for Paytm now appear “largely behind” and the company has also announced plans to offer Default Loss Guarantees (DLG) compliant with RBI guidelines to its lending partners in the merchant loans distribution business.

Paytm received relief at the hands of the National Payments Council of India (NPCI) who allowed its parent company to onboard new UPI users, nine months after the Reserve Bank of India had barred the onboarding of any new users. It has completed the migration of 13.5 crore UPI customers to the Paytm TPAP app, it said in an exchange filing on Tuesday.

Paytm has given a Default Loss Guarantee of up to ₹225 crore over time on loans disbursed by lending partners to merchants. This will result in a financial expense of ₹225 crore over a period of time for the company.

While revenue for the September quarter was in-line with Citi’s expectations, a big reduction in operating expenses led to a “significant beat” on the adjusted EBITDA front for Paytm, Citi wrote in its note.

As a result, Citi has raised its earnings estimates for Paytm and its target multiple to 42 times Enterprise Value to Adjusted EBITDA.

Brokerage firm Jefferies maintained its “hold” rating on Paytm with a price target of ₹700, saying that the risks to Paytm have “meaningfully reduced” with the NPCI approval.

However, it did not upgrade the stock as it believes that Paytm’s valuations of 3.1 times September 2026 Enterprise Value to Sales, capture the near-term optimism on the stock.

Out of the 18 analysts that have coverage on Paytm, seven of them have a “buy” rating, six say “hold” and five of them have a “sell” rating on the stock.

Shares of Paytm ended 7.5% higher on Wednesday at ₹738.2. Despite the upgrade, Citi’s price target is 58% lower than Paytm’s IPO price of ₹2,150, while its current price is 65% below the issue price.