Paytm shares rally over 5% as brokerages raise target price on Zomato deal

Shares of fintech major One 97 Communications, which operates Paytm, surged approximately 5.5% to a day’s high of Rs 604.45 on the BSE on Thursday. This increase followed brokerages raising their target prices after the company sold its entertainment business to Zomato.

Global brokerage CLSA has maintained a “Hold” rating on Paytm but increased its target price from Rs 480 to Rs 530. Similarly, Citi has raised its target price from Rs 410 to Rs 440, while maintaining a “Sell” rating.

CLSA has increased its FY26-27 adjusted PAT estimates by 12% for FY27 due to the interest income from this deal. Citi also views the sale of the ticketing and events business as a positive move and noted that the next potential trigger for Paytm would be government approval for FDI in payment aggregators.

“In our view, the deal would shore up Paytm’s cash and cash equivalents, which would possibly be used to scale up the rewards/cash-back program to revive its dwindling payment business following the RBI action. The net one-off gains adjusted for the earnings outgo would reduce net loss in FY25E, but hurt future earnings,” Emkay Global’s Anand Dama said.

Based on its rough proforma estimates, net value addition in target price due to the deal could be only Rs 25 per share, far lower than the stock price reaction already seen after the news flow around the deal, he said.In the last 2 weeks, Paytm shares have already rallied around 16% ahead of the Zomato announcement.The Rs 2,048 crore deal is expected to further strengthen the balance sheet for Paytm and will enable the company to focus on its core Payment and Financial business.Motilal analysts noted that the sale would allow Paytm to focus more sharply on its core businesses, including travel, deals, and cashback services. This concentration is crucial for expanding the merchant base and boosting overall sales. The brokerage, which maintains a neutral stance on the stock with a target price of Rs 550, believes this strategic move could enhance shareholder value by focusing on high-growth areas.

“The sale of its entertainment business would provide a financial boost, as this transaction will generate significant profits for Paytm, allowing it to reinvest in other high-potential areas. Cash proceeds will further strengthen the balance sheet. We estimate Paytm’s EBITDA to turn positive by FY27,” Motilal said.