Paytm shares tank 5% post Q3 results; should you buy, hold or sell?

One 97 Communications Ltd saw its shares falling 5 per cent in Frida's trade even as the parent of Paytm reported a net profit of Rs 225 crore for the quarter ended December 31, in line with analyst estimates. This was the third consecutive profitable quarter for Paytm. The company had posted a net loss of Rs 208 crore in the corresponding quarter last year. 

Following the results, Paytm shares fell 4.58 per cent to hit a low of Rs 1,115.10 on BSE. The stock later recovered and was trading at Rs 1,133.90 at 12.50 pm, still down 2.98 per cent. 

JM Financial said Paytm continued its track record of delivering better than expected profits, adjusted for one-time labour code impact. It said revenue for Paytm grew 7 per cent sequentially, with contribution margin (CM) at 57 per cent, as guided by the management earlier. 

"With payment processing margin improving both due to mix and pricing along with efficiencies in indirect expenses, Paytm delivered 80bps rise in Ebitda margin," it said while suggesting a buy rating on the stock.

JM Financial said Paytm'sQ3 sales was roughly in-line with consensus estimates, adding that the growth was led by higher payments gross merchandise value (GMV), merchant subscriptions, and distribution
of financial services revenue. On a like-to-like basis, revenue grew 25 per cent YoY, it said.

Contribution margin stood at 56.9 per cent was below JM's and consensus estimates by 20 basis points and 200 basis points. The sequential decline in margins was due to phasing out of DLG revenue from H2FY25, it said.  

"Ebitda (adjusted for labour-code provisions) stood at Rs 168.40 crore vs Rs 142 crorein 2QFY26, a marginal miss of 1.2 per cent on JMFe, though a beat of 3.4 p cent on consensus, due to a minor miss on contribution margin and higher than expected software costs," JM Financial said.

Ebitda margins stood at 7.7 per cent against 6.9 per cent in Q2FY26, in-line with JMF and ahead of consensus estimate of 7.4 per cent.

For the quarter, Paytm said number of registered merchants stood at4.8 crore against 4.7 crore in Q2, up 2.1 per cent QoQ or 11.6 per cent YoY. Payment devices stood at 1.41 crore, up 5.1 per cent QoQ or 23.4 per cent YoY.