Paytm’s Merchant Network Expansion Eases Competition Concerns, Says Bernstein

In its latest assessment of Paytm’s second-quarter results for the financial year 2026-27, Bernstein highlighted the addition of approximately seven lakh merchant devices during the September quarter, maintaining the company’s recent pace of expansion.

The brokerage said sustained additions to the merchant network were helping address concerns about rising competitive pressure in the digital payments sector.

Merchant network expands to 1.64 crore devices

Paytm’s merchant device network grew to 1.64 crore, reflecting its expanding presence among businesses accepting digital payments.

Consumer engagement also improved during the quarter. The company’s monthly transacting users increased by 50 lakh sequentially and one crore year-on-year to reach 8.5 crore.

Bernstein identified the rise in active users as another positive indicator, suggesting that Paytm continues to strengthen engagement across its payments ecosystem even as competition intensifies.

Revenue and EBITDA record strong growth

Paytm reported revenue of ₹2,648 crore for the quarter, an increase of 28 per cent year-on-year. Earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 90 per cent to ₹270 crore.

Although indirect expenses increased in absolute terms, they declined as a proportion of revenue to approximately 46 per cent, compared with 52 per cent a year earlier.

Bernstein highlighted this improvement as evidence of better operating leverage, indicating that revenue was growing faster than certain operating costs.

Payments monetisation improves

The brokerage also pointed to stronger monetisation of Paytm’s payment transactions.

Net payment margins increased from 8.5 basis points to 9.1 basis points, while net payment revenue rose 7 per cent sequentially despite payment gross merchandise value (GMV) remaining flat compared with the previous quarter.

The improvement suggests that Paytm generated more payment revenue from its existing transaction volumes, offering support to its payments business even without sequential growth in GMV.

Financial and marketing services add momentum

Paytm’s financial services business remained another source of growth, with revenue increasing 49 per cent year-on-year and 12 per cent quarter-on-quarter.

Marketing services revenue also recovered, rising 26 per cent year-on-year and 20 per cent sequentially. The performance marked an improvement after several quarters of stagnation in the segment.

The growth across these businesses points to a broader contribution to Paytm’s revenue beyond merchant payments alone.

Bernstein retains ₹2,200 target price

Bernstein maintained its ‘Outperform’ rating and target price of ₹2,200 for Paytm. Based on the company’s October 26 closing price, the target implied approximately 33 per cent potential upside, according to the report.

The brokerage’s assessment rests on continued merchant expansion, rising consumer activity, improving payment margins and growth in financial and marketing services.

However, the report also flagged rising operating expenses, underscoring the importance of sustaining revenue growth and improving cost efficiency as Paytm competes in India’s rapidly evolving digital payments market.

The target price represents Bernstein’s assessment rather than a guaranteed future share price, and actual performance will depend on the company’s financial results and broader market conditions.