PAYTM

Profitable but Faces Competitive Intensity from PhonePe

Shares of One 97 Communications Ltd. (

) have been in focus as investors weigh the potential valuation of PhonePe’s upcoming public issue. Paytm, the closest listed peer, is already profitable at the EBITDA level, while PhonePe remains loss-making. However, PhonePe’s larger user base and market share could justify a valuation premium. Analysts caution that Paytm’s absolute valuation is already rich, and competitive intensity in financial product distribution may pressure margins. Valuation Comparison - Paytm market cap: ₹73,000 crore. - PhonePe IPO valuation: Reported at $15 billion (~₹1.35 trillion). - Market-cap-to-revenue multiple: Paytm ~10x, PhonePe ~17x (based on H1FY26 annualized revenue). - EV/EBITDA multiple: Paytm 31x FY28E, per Bloomberg consensus. Profitability & Revenue Mix - Paytm: Profitable at EBITDA level. - PhonePe: Loss-making at EBITDA level. - Distribution revenues: Paytm’s H1FY26 distribution revenues were 2x PhonePe’s, down from 10x in FY24. - Distribution contributes ~30% of Paytm’s revenue. User Base & Market Share - PhonePe: 238 million monthly active users, 46% UPI market share (FY26 YTD). - Paytm: 76 million monthly active users, 7% UPI market share. - Larger user base gives PhonePe greater cross-selling potential, similar to Groww vs Angel One in discount brokerage. Risks for Paytm - Valuation gap may persist: Street may continue to assign premium multiples to faster-growing peers, as seen in Groww vs Angel One. - Competitive intensity: PhonePe narrowing distribution gap could pressure Paytm’s margins. - Absolute valuation: Paytm trades at rich multiples despite modest growth. - Regulatory risk: NPCI may cap UPI app market share at 30% post-2026, but multiple players (including Jio Financial) could benefit, not just Paytm. Outlook - Macquarie: Neutral on Paytm’s absolute valuation, but notes relative discount vs PhonePe. - Investor confidence hinges on Paytm sustaining profitability while defending market share in distribution.