Retail investors, meanwhile, have continued to trim exposure for the sixth consecutive quarter. Paytm’s retail shareholding fell to 9.07% in September 2025, from 9.73% in June and 12.05% in March 2024. In June 2024, retail holding was over 14%, BSE data showed.
The shift in shareholding coincides with Paytm’s remarkable stock comeback from record lows, attracting renewed institutional confidence after regulatory pressures drove the stock down to Rs 609 in February 2024. In just 20 months, the stock has more than doubled, trading near Rs 1,300.
What’s driving institutional optimism?
Brokerages believe Paytm’s omnichannel presence in merchant payments and improving profitability metrics are key drivers of mutual funds’ bullish stance. According to Axis Capital, Paytm operates one of India’s largest offline merchant networks, with around 13 million devices — including soundboxes and electronic data capture (EDC) machines — across small and large enterprises. It is also among the top four online payment aggregators by gross merchandise value (GMV).
As merchant relationships mature, analysts see potential for monetization through cross-selling lending products or price hikes on devices and services. Axis Capital noted that Paytm’s pilot project to raise soundbox subscription fees from Rs 100 to Rs 129 has shown encouraging results.
“Large merchant payment players are entering a strong earnings expansion phase,” the brokerage said in its October 15 report. “Paytm is well positioned with its omnichannel presence and high-vintage merchant relationships.”The firm expects a healthy pricing environment and margin improvement as the UPI mix stabilizes and credit-linked products gain traction. Regulatory clarity — including payment aggregator norms, merchant KYC, and the default loss guarantee (DLG) model — has further boosted investor confidence.Axis Capital has raised its FY27–28 EBITDA estimates by 33–46%, citing improved payment margins, scaling of financial services, and tighter operating costs. It upgraded the stock to a ‘buy’ with a target price of Rs 1,500, valuing it at roughly 41 times FY28 estimated EV/EBITDA, while cautioning that deterioration in lending asset quality remains a key risk.
Regulatory tailwinds return
JM Financial highlighted that the Reserve Bank of India’s (RBI) in-principle approval for Paytm Payments Services Ltd. (PPSL) to operate as an online payment aggregator marks a significant regulatory breakthrough. The nod lifts the ban imposed in November 2022 on onboarding new merchants, which had weighed on investor sentiment.
The brokerage noted that the approval indicates RBI satisfaction with Paytm’s compliance measures and shareholding structure, enhancing the likelihood of eventual approval for the company’s wallet business under Paytm Payments Bank Ltd. (PPBL). The regulatory clarity has helped restore confidence among institutional investors, who had been cautious since the RBI’s early-2024 crackdown that halted fresh deposits and wallet top-ups over repeated compliance lapses.
Cautious optimism remains as analysts warn that competition and technology risks persist. Paytm’s revenue is primarily driven by its online platform, which requires minimal capital expenditure, but India’s rapidly growing fintech market attracts global players who could sustain long-term competition and trigger price wars.
The company’s success hinges on scaling its technology infrastructure to support a growing user base on app and web platforms. Any service disruptions, technical glitches, or cyberattacks could hurt demand, processing efficiency, and customer trust.
Despite these risks, Paytm shares have surged over 70% in a year and roughly 45% in the last six months, reflecting renewed investor optimism.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)