Neutral One 97 Communications; target of Rs 1000

Mumbai, July 1, 2025 — Leading brokerages have maintained a “Neutral” rating on One 97 Communications Ltd, the parent of Paytm, with a price target of ₹1,000. The cautious optimism stems from the company's ongoing restructuring efforts post the Reserve Bank of India's (RBI) clampdown on Paytm Payments Bank and the need for more clarity on sustainable revenue growth and operational margins.

While the stock has staged a mild recovery since hitting a multi-year low earlier this year, analysts argue that the business still faces headwinds, and the risk-reward ratio at current valuations appears balanced.

Restructuring Underway: Eyes on Non-Banking Revenue Streams

Since the RBI’s action that curtailed the operations of Paytm Payments Bank from February 2024, One 97 Communications has been realigning its business model, shifting focus from regulated banking services to partnerships with third-party banks and NBFCs. Analysts at Motilal Oswal Financial Services noted:

“There is a clear effort by Paytm to pivot toward a platform-based fintech aggregator model. However, monetization of these newer partnerships is still at a nascent stage.”

Brokerage firm JM Financial also echoed similar sentiments, stating in its latest report:

“We believe the company will require at least two more quarters to stabilize the revised business model. In the interim, top-line pressure and margin dilution are likely.”

Stock Performance and Market Sentiment

One 97 Communications’ stock currently trades around ₹870 levels, recovering nearly 30% from its March 2025 lows of ₹670, which were driven by investor panic following regulatory scrutiny. However, the stock is still significantly off its IPO price of ₹2,150 and far from the all-time high it reached during the early months post-listing.

Volumes on the counter have risen lately, attributed to both retail bargain-hunting and selective institutional buying. Yet, fund managers remain cautious.

“The current valuation implies expectations of a sharp turnaround. While management commentary has been positive, we are yet to see tangible financial results to support a higher multiple,” said Rohan Mehta, a portfolio manager at an institutional equity fund.

Revenue Pressures and Path to Profitability

One 97 reported a consolidated net loss of ₹328 crore in Q4 FY25, compared to a loss of ₹167 crore in the previous quarter. Revenues declined sequentially by 9% to ₹1,430 crore due to disruptions caused by regulatory interventions and an ongoing transition to a partner-led model.

The company’s CEO, Vijay Shekhar Sharma, acknowledged the short-term pain but emphasized the long-term growth vision:

“We are building a sustainable fintech platform, free from regulatory bottlenecks. Our lending, insurance distribution, and commerce offerings through partnerships are already showing early signs of traction.”

Still, analysts suggest that monetizing the merchant base and increasing take-rates will be crucial in offsetting the loss from Payments Bank operations.

Key Challenges Ahead

1. Regulatory Uncertainty: The RBI is yet to grant a full green light to Paytm’s alternative banking partnerships. The shadow of regulatory risk continues to hover.

2. Trust Deficit: Users and merchants have shifted to competitors like PhonePe and Google Pay. Regaining market share will require aggressive incentives and time.

3. Profitability Metrics: Sustained EBITDA positivity remains elusive. Analysts expect breakeven only by FY27, provided no further regulatory setbacks occur.

4. Management Execution: The success of new verticals—like co-lending, credit underwriting, and insurance broking—depends heavily on Paytm’s ability to execute and scale efficiently.

Analyst Outlook: Wait-and-Watch Mode

Brokerages like ICICI Securities, HDFC Securities, and Kotak Institutional Equities have advised investors to remain cautious despite the company's long-term potential. Their consensus target for the next 12 months is ₹1,000, indicating limited upside from current levels.

“We don’t see strong catalysts for a sharp re-rating in the next two quarters. Investors should wait for margin improvement and user metrics stabilization,” said Anisha Roy, fintech sector analyst at ICICI Securities.

However, aggressive investors with high-risk appetite may consider accumulating the stock on sharp dips, given Paytm’s significant brand equity and user base across Tier-II and Tier-III cities.

A Story of Rebuilding Amid Uncertainty

One 97 Communications is at a pivotal moment in its journey. While the worst of the regulatory crackdown may be behind it, the road to revival is not without hurdles. For now, a “Neutral” stance reflects market consensus—one that balances potential upside with execution and compliance risks.

Only time will tell whether Paytm can reinvent itself successfully in India's ever-evolving fintech landscape.