Paytm Stock Rallies 29% in 4 Weeks: Unpacking the Underlying Trends

With global markets continuing to swing to the tunes of the US’s tariff flip-flops, benchmark indices in India gained over 2% on Tuesday, 15th April 2025. Notably, it became the first major market to recoup the losses made since the reciprocal tariffs were first announced on 2nd April 2025. While the primary indices are closing on a positive note, another stock that made it to the green light zone is the stock of Paytm’s parent company, One97 Communications Limited. What was the surge, and what caused the rise in Paytm share price? Let’s decode.

Overview Of One 97 Communications Limited (PAYTM):

Founded in 2000 by One 97 Communications Limited, Paytm has evolved into one of India’s most extensive digital ecosystems, serving both consumers and merchants. With over 30 crore users and more than 2 crore merchants, Paytm has been at the forefront of India’s digital payment revolution. Its mobile app facilitates a wide range of consumer payments: mobile recharges, utility bills, education fees, ticket bookings, and peer-to-peer transfers through instruments like UPI, cards, and net banking.

Paytm offers QR codes, POS devices, and Soundbox devices for merchants that support digital collections and enhance payment reconciliation. This generates revenue via merchant discount rates (MDR), convenience fees, and subscription models. The platform also supports online and omnichannel merchants through payment gateways.

Beyond payments, Paytm has built a robust financial services arm, offering credit distribution, insurance, and wealth management through its digital lending platform in partnership with financial institutions. It earns revenue from loan sourcing, collection, and marketing services.

Short-Term Drivers Of The 29% Growth:

The shares of Paytm’s parent company witnessed a consistent upward trend over the last four weeks and gave a return of nearly 29% as of 15th April 2025. In the initial hours of the next trading session (16th April), the stock recorded a 3% raise taking the intraday high at Rs.869.45 at around 11.30 a.m.

This growth over the past month can be attributed to the recent deals locked by the company and other key short-term catalysts that instilled positive sentiment among investors. 

1. Increased Stake By Domestic Mutual Funds:

During the March quarter, domestic mutual funds raised their holding in Paytm to an all-time high of 13.1%. This increase was primarily driven by prominent players like Nippon India Mutual Fund and Motilal Oswal Mutual Fund, which increased their stakes by 0.4 and 0.2 percentage points, respectively. Overall institutional ownership, including domestic and foreign entities, rose by approximately 1 percentage point to 69%. 

Other domestic institutions also showed growing interest: five new insurance companies came on board, raising their combined stake to 28 lakh shares. Alternative Investment Funds (AIFs) added two new entities and increased their holdings from 22 lakh to 28 lakh shares.  (source: Mint)

2. Subsidiary Getting Approval:

On 18th March, Paytm’s subsidiary, Paytm Money, received SEBI approval to operate as a registered Research Analyst. This allows the platform to offer investment research and data-backed insights, opening up a new revenue stream. Post announcement, the stock rebounded from its 200-day moving average of Rs.690, closing higher at Rs.735.6. (Source: CNBC)

3. ESOP Allotments:

Under the Employee Stock Option Plan, employees can purchase company shares at a predetermined price (often lower than market value) after a vesting period. As of 9th March 2025, Paytm allotted 84,793 equity shares under ESOP 2019 and ESOP 2008. This move slightly expanded the company’s share capital from Rs.63.76 crore to Rs.63.77 crore.

While the allotment was modest, the market responded positively, with the stock gaining 3% as of 11th March 2025. Later, on 27th March, the fintech firm announced the allotment of 93,219 more equity shares under ESOP 2019.  (Source: CNBC)

4. Paytm and GHMC Partnership:

Paytm partnered with the Greater Hyderabad Municipal Corporation (GHMC) to streamline property tax collection by deploying over 400 All-In-One EDC devices. These machines allow residents to pay using cards or QR codes and integrate with the GHMC app for real-time verification and receipts. Following this announcement, Paytm’s closing stock price rose from Rs.783.45 on 1st April to Rs.801.10 on 2nd April, up by around 2.25%.

5. Paytm Partnership With SBI Mutual Fund:

Paytm announced a partnership with SBI Mutual Fund on 18th March 2025 to launch the JanNivesh Rs.250 SIP. It is an initiative to enable users to invest in mutual funds with just Rs.250. This collaboration supports the government’s mission of enhancing financial literacy and inclusion.

Long-Term Underlying Factors Of Growth For Paytm:

Over the last three years, the stock has garnered a return of 26.74% and 123.81% over the past one year as of 16th April 2025. Over the years, the company’s gradual recovery from past disruptions and regulatory scrutiny has been a key growth driver. Apart from this, the other primary drivers for this growth are as follows-

Revenue Growth:

The financial performance of Paytm over the last five financial years (FY2020- FY2024), along with the most recent quarterly data, reveals a consistent pattern of revenue growth. Concurrently, the company’s net losses have shown a general trend of decrease over the same tenure. 

Improved Operational Efficiency:

The recent annual assessment of Paytm (Annual report for FY2024) highlighted the company’s growing efficiency in all of its business segments. 

Payment Services: 

This segment witnessed a 26% revenue growth in FY2024, reaching Rs.6,236 crore. A significant driver for this growth was the deployment of payment devices, which rose to 107 lakh in March 2024 from 68 lakh in the previous year. This expansion directly translates to higher subscription revenues, indicating a strong operational improvement in merchant acquisition and engagement. The payments margin also improved significantly by 50% year-over-year to Rs.2,955 crore in FY 2024, showcasing enhanced efficiency in payment processing.   

Financial Services: 

Paytm’s loan distribution business has scaled with a 48% year-over-year growth in FY2024, disbursing loans worth Rs.52,390 crore. The revenue from Financial Services & Others also saw an increase of 30% year-over-year, reaching Rs.2,004 crore in FY2024.   

Marketing Services: 

This segment also contributed to the overall growth, with a 14% increase in revenue, reaching Rs.1,738 crore in FY2024.   

Bottomline:

Paytm’s recent stock rally, driven by improved financial performance, strategic partnerships, and growing institutional interest, reflects a renewed confidence in the company’s long-term potential. The company’s diversified ecosystem, expanding user base, and innovative offerings have positioned it as a key player in India’s digital transformation story. Strengths such as technological innovation, a robust partner network, and growing financial metrics are encouraging, while persistent challenges, including regulatory scrutiny, competition, and reliance on domestic markets, remain essential considerations.

The fintech space in India is evolving rapidly, and companies like Paytm are well-poised to capitalize on emerging opportunities. However, given the inherent volatility of the sector and the company’s journey toward sustainable profitability, investors should approach it with cautious optimism. It is thus essential to conduct thorough personal research and consider your financial goals and risk appetite before making any investment decisions. 

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