Paytm Shares Rally on Budget Boost and Strong Q3 Results

Introduction

Shares of One 97 Communications Ltd, the parent entity of Paytm, experienced a significant recovery, rebounding nearly 22% from their intraday low on Sunday. The rally was fueled by a combination of positive announcements in the Union Budget and the company's strong financial performance in the third quarter of fiscal year 2026, signaling renewed investor confidence in the fintech major's growth trajectory.

Union Budget Provides a Digital Payments Boost

A key catalyst for the stock's upward movement was the Union Budget announcement by Finance Minister Nirmala Sitharaman. The government introduced a Rs 2,000 crore incentive scheme to promote the use of RuPay debit cards and the Unified Payments Interface (UPI) for the upcoming financial year. This subsidy is designed to support the digital payments ecosystem, where UPI transactions account for approximately 85% of all online transactions in the country. Following this news, Paytm's shares surged from a day's low of Rs 1,023.30 to Rs 1,244.05, marking a sharp 21.57% recovery.

Strong Q3 Financial Performance

Adding to the positive sentiment, One 97 Communications reported a robust performance for the quarter ending December 2025. The company successfully turned profitable, posting a net profit of Rs 225 crore. Revenue from operations grew by a healthy 20% year-over-year, reaching Rs 2,194 crore. Furthermore, the company's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) turned positive at Rs 156 crore, resulting in an EBITDA margin of 7% for the quarter. This performance underscores the company's progress toward achieving sustainable profitability.

Key Financial Highlights (Q3 FY2026)

Brokerages Turn Bullish on Paytm's Outlook

The strong quarterly results and favorable government policy prompted several brokerage firms to upgrade their ratings and target prices for Paytm.

JM Financial reiterated a 'buy' rating with a March 2027 target price of Rs 1,660. The firm noted that while contribution margins saw a slight dip, the growth momentum in payments and financial services remains strong. They expect margins to sustain in the mid-50s, supported by operating leverage.

Bernstein maintained an 'outperform' rating with a target price of Rs 1,600. The brokerage highlighted the healthy GMV growth, acceleration in financial services revenue, and disciplined cost control as key positives. They also drew comfort from management's commentary on the insignificant impact of recent regulatory developments.

Jefferies also issued a 'buy' rating with a target of Rs 1,450, stating that the company's profit was ahead of estimates. They credited the performance to strong growth in financial services and lower indirect costs.

Goldman Sachs significantly upgraded the stock to 'Buy' from 'Neutral', more than doubling its target price to Rs 1,570. The firm cited an improving regulatory environment, recovery in payments market share, and better earnings visibility as key drivers for the upgrade.

ICICI Securities hiked its target price to Rs 1,450, maintaining a 'Buy' call. The brokerage sees strong earnings potential driven by expansion in payment and loan distribution, along with margin improvements.

Regulatory Headwinds Clear

Another significant positive development was the final approval from the Reserve Bank of India (RBI) for Paytm's wholly-owned subsidiary, Paytm Payments Services Limited (PPSL), to operate as a payment aggregator. This authorization, granted in late November 2025, allows PPSL to resume onboarding new online merchants, a process that had been on hold. This regulatory clarity removes a major overhang on the business and opens up a key growth avenue.

Stock Performance and Market Context

The confluence of these positive triggers has had a substantial impact on Paytm's stock performance. The share price has demonstrated strong momentum, rising from a 52-week low of Rs 651.50 earlier in the year to a fresh 52-week high of Rs 1,364.80. The recent rally has extended the stock's gains, which now stand at over 47% in the last six months and approximately 37% year-to-date in 2025. The company's market capitalization stood at Rs 78,000 crore following the recent surge.

Analysis and Forward Outlook

The recent events paint a favorable picture for Paytm. The combination of a supportive government policy for digital payments, a strong financial turnaround demonstrating a clear path to profitability, and clearing regulatory hurdles has aligned to boost investor confidence. The wave of positive ratings from prominent brokerages further reinforces this sentiment. The company's focus on expanding its merchant subscription services and growing its loan distribution business appears to be yielding positive results. While the broader market conditions and any future regulatory changes remain factors to monitor, the company's current trajectory is decidedly positive.

Conclusion

Paytm's recent stock rally is backed by solid fundamental improvements and positive external developments. The government's UPI incentive provides a favorable operating environment, while the company's Q3 results confirm its ability to execute on its strategy of profitable growth. With regulatory clarity on its payment aggregator license, Paytm is well-positioned to strengthen its market leadership. Investors will now be closely watching for sustained profitability and continued growth in its key business segments in the coming quarters.