This analyst downgraded Paytm when most others upgraded and raised targets

Brokerage firm CLSA has downgraded shares of One97 Communications Ltd., parent company of payments aggregator Paytm to “underperform” from its earlier rating of “hold” on Wednesday, July 23.This comes at a time when most other analysts covering the stock have either upgraded it or raised their price targets after Paytm reported its first quarterly profit without any exceptional gains during the June quarter.

Despite the downgrade, CLSA has raised its price target on Paytm to ₹920 from ₹870 earlier.

The brokerage said in its note that it acknowledges that Paytm has turned around from the 2024 RBI crisis faster than they had imagined. However, shareholders have also been duly rewarded as a result of this turnaround.
From the February 2024 lows, shares of Paytm have gained more than 3.5x to now trade at a 52-week high.”At this juncture, risk-reward is unfavourable in our view,” the CLSA note said. While the current financial year will have deferred Default Loss Guarantee (DLG) revenue and no additional cost, the next year will not have any such benefits.

As a result, CLSA has cut its financial year 2027-2028 estimates on Paytm’s adjusted Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) by 4% and 8% respectively.

CLSA also highlighted the 20% upmove that the stock has seen in the last three months, despite the Finance Ministry clarifying that there will be no charges on UPI as another reason behind the downgrade.

19 analysts have coverage on Paytm, where 10 have a “buy” rating, five say “hold” and four have a “sell” recommendation. Dolat Capital has the highest target of ₹1,400 on the stock, which is still below its IPO price of ₹2,150.