Morgan Stanley turns bullish on Paytm, raises target 35% to ₹1,950 on earnings

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The revised target implies an upside of about 22% from Paytm's closing price of ₹1,601.60 on October 27

By PTI

Updated - October 28, 2026 at 02:05 PM. | New Delhi

Morgan Stanley has upgraded One 97 Communications Ltd, the parent of Paytm, to Overweight from Equal-weight, raising its price target by 35 per cent to ₹1,950 from ₹1,450. | Photo Credit: FLORENCE LO

Morgan Stanley has upgraded One 97 Communications Ltd, the parent of Paytm, to Overweight from Equal-weight, raising its price target by 35 per cent to ₹1,950 from ₹1,450 as it sees stronger execution across payments and financial services supporting faster growth and further earnings upgrades.

The revised target implies an upside of about 22 per cent from Paytm's closing price of ₹1,601.60 on October 27. Morgan Stanley said continued execution, favourable industry developments and the potential for upward revisions to earnings estimates could support a further re-rating of the stock.

The upgrade comes after Paytm shares gained 46 per cent over the preceding six months. Despite the rally, the brokerage sees scope for further gains as revenue growth accelerates and profitability improves. It noted that consensus estimates for the company's FY28 earnings before interest, taxes, depreciation and amortisation had risen by more than 21 per cent over the same period.

Morgan Stanley expects Paytm's payments business to gather pace in the second half of fiscal 2027, supported by growth in monthly transacting users and improving consumer market share in the unified payments interface, or UPI, ecosystem.

The company has grown its consumer UPI payment gross merchandise value at roughly twice the industry rate over the past few quarters, according to the brokerage. Morgan Stanley forecasts payment GMV to grow at a compound annual growth rate of about 23 per cent between FY27 and FY29.

Financial services are expected to provide another growth driver, with revenue set to scale up in FY28 as Paytm expands its Postpaid offering and builds on its financial services distribution business.

Morgan Stanley forecasts overall revenue to grow at a compound annual growth rate of about 30 per cent between FY26 and FY29. It has raised its FY28 and FY29 EBITDA estimates by 30 per cent and 22 per cent, respectively, reflecting stronger expectations for payments and financial services, as well as the potential benefit of changes to the UPI merchant discount rate framework.

The proposed MDR framework could create an incremental revenue opportunity of about ₹900 crore in FY28 and ₹1,100 crore in FY29, Morgan Stanley estimates. It assumes that 60 per cent to 65 per cent of the benefit would flow through to EBITDA, with the remainder potentially funding additional investments or being offset by competitive pressures.

The estimates remain contingent on the framework's implementation, making the timing and structure of any changes an important variable in Paytm's earnings outlook.

Morgan Stanley expects EBITDA to rise from about ₹1,053 crore in FY27 to ₹2,660 crore in FY28 and ₹3,843 crore in FY29, signalling a sharp improvement in operating profitability as the business scales.

The brokerage has also increased its valuation multiples across scenarios by as much as 11 per cent, citing improved execution, greater growth visibility and potential earnings benefits from MDR changes. Its revised valuation incorporates a 60 per cent probability for the base case, 30 per cent for the bull case and 10 per cent for the bear case.

The upgrade signals growing confidence in Paytm's ability to convert its scale in digital payments into sustained revenue growth and higher profitability. Faster UPI growth could strengthen its consumer payments franchise, while financial services distribution and Postpaid offer additional avenues to monetise its customer base.

The potential MDR changes represent a further earnings catalyst, but their contribution depends on the final framework and how much of any incremental revenue Paytm can retain after investments and competitive pressures.

Published on October 28, 2026

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