Paytm just might be that rare SoftBank bet that pays off big—even though the Japanese telecoms giant’s Vision Fund completed its exit from the Indian fintech sensation in Dec. 2024. While Paytm’s core financials continue to improve, its performance in capital markets (the stock is up 43% over the past year) is equally, if not more, impressive.
That’s because Paytm was until recently a poster child for the excess of the late 2010s/early 2020s fintech bubble. Not only did the Indian fintech firm burn heaps of cash with the best of them, but it also IPO’d in November 2021 at the peak of the bubble at an inflated valuation of US$18.6 billion.
It did not take long for investors’ concerns to be manifested. A year later, the stock had lost 75% of its value, and the company had a market capitalization of just US$3.8 billion. Meanwhile, the company was dogged by consistent questions about its path to profitability, regulatory travails, and broader business strategy. Paytm hit rock bottom in early 2024 when the Reserve Bank of India (RBI) banned its payments bank from accepting new deposits, top-ups, or credit transactions because of severe compliance issues. Per the RBI’s decision, Paytm was required to transition from being a payments bank app to a third-party application provider (TPAP). This change coincided with and contributed to a significant decrease in its payments transaction volume.
That move by the RBI also caused Paytm’s share of India’s dominant retail UPI payments rail to plummet from around 13%-14% to just 6%-7%. Google and PhonePe, already the dominant UPI apps, used the opportunity to further entrench their respective market shares. It will be difficult—though not impossible—for Paytm to claw back some UPI market share from them.
To its credit, in the past 18 months, Paytm has gotten its compliance issues sorted, refined its business strategy, and improved its core financials. Those moves earned it a significant upgrade from analysts at Goldman Sachs. In a Nov. 30 research note, Goldman raised its target price on Paytm’s parent company, One97 Communications, by more than 100%, from 705 to Rs 1,570, and upgraded the stock from a “Neutral” to a “Buy.” In the note, Goldman cited easing regulatory pressures as a key reason for the upgrade. Goldman expects that Paytm’s EBITDA margins could more than double in the coming three to four years, indicating the company is indeed finally on a path to profitability.
In the September quarter (Paytm’s fiscal second quarter of 2026), the company reported a consolidated net profit of roughly US$2.4 million. The June-September period was the company’s second consecutive quarter of positive profit after tax. A key driver of its solid financial performance this year is growth in its merchant base and loan distribution business, which is improving the company’s margins.
Also auguring well for Paytm is that the company recently secured a Certificate of Authorization from the RBI to operate as a payment aggregator. The approval, granted in late November, came after the RBI rejected the initial application in November 2022 due to foreign investment compliance issues. The payment aggregator license allows Paytm to onboard merchants, which is crucial for its long-term growth. During the period before receiving the in-principle approval, Paytm was unable to add new merchants and could only continue servicing its current merchant base.
This put the company at a disadvantage vis-à-vis competitors such as Razorpay, Pine Labs, Cashfree, and PayU. They have all been authorized to operate as payment aggregators, with approvals covering online, offline, and cross-border payment services. Easebuzz also recently received RBI authorization to operate as a payment aggregator.
Looking ahead, if Paytm continues to perform as well as it has in recent months, SoftBank may end up regretting its decision to exit the Indian fintech giant.