One 97 Communications

Investment case

Turnaround: profitable payments platform

Why this business

India's largest merchant-payments platform (1.57 cr subscription devices/Soundboxes, GMV Rs 7.1 lakh cr in Q1FY27, 8.0 cr monthly transacting users) that monetises payments via device subscriptions and net payment margin, and distributes merchant and personal loans plus insurance/wealth for lenders (financial services revenue Rs 814 cr, +45% YoY). After the RBI shut Paytm Payments Bank (Jan-2024 action; licence cancelled 24-Apr-2026), Paytm rebuilt on partner banks with a TPAP licence (Mar-2024) and a payment-aggregator licence for subsidiary Paytm Payments Services (2026). Consumer UPI GTV grew 45% YoY vs ~20% industry in Q1FY27.

What we believe

1. 01Turnaround is delivered, now compounding: from EBITDA -Rs 1,506 cr in FY25 to +Rs 501 cr in FY26 and a record Rs 203 cr in Q1FY27 alone (8% margin) while management targets 15-20% EBITDA margin - operating leverage on a 55% contribution margin.
2. 02Merchant franchise is growing again post-RBI: 1.57 cr subscription devices (+27 lakh YoY), GMV Rs 7.1 lakh cr (+31%), consumer UPI GTV +45% vs ~20% industry, MTU 8.0 cr (+60 lakh YoY) - share is being regained from PhonePe/GPay.
3. 03High-margin lending distribution: financial services revenue Rs 814 cr (+45% YoY), >50% repeat merchant borrowers, 7.6 lakh customers (+34%); this is asset-light (no credit risk on book) and drives the PAT +79% YoY.
4. 04Regulatory overhang largely cleared: PPBL licence cancelled 24-Apr-26 (already exited), PA licence granted to Paytm Payments Services in 2026, TPAP since Mar-24; MDR on large merchants (Taxation & Other Laws Amendment Bill 2026) would be a revenue tailwind for the largest merchant acquirer.
5. 05Net cash Rs 13,529 cr (13% of mcap) and 'almost debt free' (borrowings Rs 172 cr) fund devices, AI cost-out and buybacks.

Why now

TTM P/E 130x is not comparable to history (loss-making until FY26); stock at Rs 1,642 is ~4x the Mar-2024 post-RBI trough and near its 52-wk high of Rs 1,732. Computed EV/EBITDA on EV Rs 91,823 cr (mcap less Rs 13,529 cr cash) / TTM EBITDA Rs 630 cr - a growth multiple, not a value one. EV/EBITDA 145.8x; dividend yield 0.0%.

Market disagreement

• PB Fintech (Policybazaar): PB Fintech trades at 110x TTM P/E and 11.3x book with 40% revenue growth but 7% EBITDA margin; Paytm has a comparable multiple with faster EBITDA scaling (record Rs 203 cr/qtr), Rs 13.5k cr net cash, and MDR/UPI policy optionality PB lacks.
• Eternal (Zomato/Blinkit): Eternal is at 715x TTM P/E and 0.4% ROE with Blinkit burning cash to defend 1,955 dark stores in a price war; Paytm is already at positive EBITDA and PAT with no capex-heavy logistics network.
• PhonePe / Google Pay (unlisted): Not investable; Paytm is the only listed Indian pure-play on merchant payments + lending distribution with a 1.57 cr device base.

Position sizing

Turnaround Mid cap  2.2% of the PMS on $31 Jul 2026 (August rank 15). Satellite positions are owned for an asymmetry, sized up when the cycle rewards risk and reduced when it does not.

Catalysts

• Finalisation of the large-merchant MDR threshold/rate under the 2026 Amendment Bill (expected H2 FY27) - direct revenue uplift for Paytm's merchant acquiring.
• Q2FY27 results (Oct/Nov-2026): progress toward 15-20% EBITDA margin and continued ~30% revenue growth (GS models 27% FY27).
• Government/NPCI FY27 UPI incentive notification and any RBI clarity on Paytm's wallet/PPI re-entry.

Risks and response

• Policy: if MDR is not introduced and incentives shrink, net payment margin (Rs 601 cr in Q1, '>4 bps') depends on device rentals, which Citi flagged as softening; regulatory history (RBI 2024) means headline risk stays high.
• Valuation: 130x TTM and 149x Buoyant FY27e P/E price in a multi-year 50%+ EPS CAGR; any slowdown in lending partners (unsecured-credit tightening) hits the highest-margin line (Rs 814 cr, +45%).
• No promoter (Vijay Shekhar Sharma classified as non-promoter; FIIs 48%, DIIs 25%, public 27%) - governance depends on board and large-holder discipline; ESOP dilution continues.

Thesis-break conditions

Not stated separately on this page; the risk list carries the monitoring triggers.

Review history

• 8 Sep 2026 · Yash Palod · one-pager in "Why We Own What We Own" (p47) · portfolio as of $31 Jul 2026
• 31 Aug 2026 · Classification in the August top-30: Turnaround

Source: Buoyant_Why_We_Own_What_We_Own_Sep2026.pdf (portfolio as of 31 July 2026), p47. Internal; external publication of these fields is controlled by audience policy.