Paytm vs Pine Labs: Jefferies forecasts 58% upside in 1 fintech stock – Here’s why

Both targets have been trimmed from their earlier levels, not because of any fundamental deterioration, but because Jefferies is building in a higher cost of equity, the risk of share supply from other companies coming to market, and broader uncertainty around the conflict in the Middle East. 

The brokerage firm values Paytm at 39 times its March 2028 estimated adjusted EV by EBITDA, and Pine Labs at 26 times the same metric for the same period. According to Jefferies, both companies are targeting over 20% revenue growth and expanding EBITDA margins through operating leverage, expanding their networks, growing faster in loan origination and moving into new business areas. Both stocks are down 20 to 30% year-to-date, which the brokerage firm sees as an opportunity rather than a warning signal.

1. The growth story of Paytm vs Pine Labs on the revenue trajectory

Paytm is projected by Jefferies to grow revenues at a compounded annual growth rate of 22% between financial year 2026 and 2028, going from Rs 8,448.7 crore in revenue estimates for FY26 to Rs 12,500.3 crore by FY28. The engine behind that growth is payments and financial services, with financial services alone expected to grow at 28% annually over the same period. Pine Labs runs a tighter, more focused operation, and Jefferies expects it to compound revenues at 23% over the same window, going from Rs 2,745.6 crore in FY26 to Rs 4,122 crore by FY28. Digital payments and issuing solutions are the two verticals driving that trajectory. On a pure revenue growth basis, both companies are broadly in the same territory.

Jefferies said, “We expect 22% revenue CAGR over FY26-28e, led by healthy growth in financial services and payments.”

It added for Pine Labs, “We expect 23% revenue CAGR over FY25-28e, led by healthy growth in digital payments and issuing.”

2. Margin expansion: Which stock has more room to run

This is where the two companies diverge sharply. Paytm starts from a much lower EBITDA margin base. Jefferies estimates adjusted EBITDA margin at 8.5% in FY26, climbing to 12.1% in FY27 and reaching 16.3% by FY28. In absolute adjusted EBITDA terms, that means Rs 718.8 crore in FY26, growing to Rs 2,036.6 crore in FY28. Pine Labs, by contrast, already sits at a 20% adjusted EBITDA margin in FY26 and is expected to reach 27% by FY28, with adjusted EBITDA nearly doubling over the period to Rs 1,093.4 crore from Rs 553.3 crore. The contribution margin story is equally telling. Paytm’s contribution margin is projected to stay in the 55 to 56% band across FY26 to FY28, while Pine Labs holds steady at around 75%, a meaningfully higher floor.

Jefferies said, “These should support 23% CAGR in revenues over FY26-28 and rise in adjusted Ebitda margin from 20% to 27%, with adjusted Ebitda nearly doubling over this period.”

3. Paytm vs Pine Labs: What each company is actually betting on

Paytm’s strategic direction under Jefferies’s lens is merchant-led. The company has 13 million sound-boxes deployed and has now piloted an artificial intelligence-based conversational sound-box at 10,000 outlets. On the lending side, the merchant lending platform is growing faster than personal loans and offers a better take rate. The bigger opportunity in the brokerage’s view is credit on Unified Payments Interface, which could unlock significant volumes once non-banking financial companies are permitted to lend, making it a future lever rather than an active one. Until then, retail lending stays mostly vanilla. Paytm is also building out wealth and travel verticals, though Jefferies does not expect these to generate meaningful revenue until FY28 or FY29.

Jefferies said, “Paytm continues to leverage its stronger presence in merchant platforms for payments as well as loan origination.”

Pine Labs is playing a different game altogether. It is expanding its Digital Commerce Platform network, growing its equated monthly instalment on cards business, and targeting mid-market merchants through master franchises that offer bundled payments, data analytics, and controls. It is also working to reduce its working capital requirements through early reconciliation and securitisation of its Instant Cash Back book, which ties up a significant amount of capital. These operational improvements, in Jefferies’s view, will drive both earnings quality and capital efficiency going forward.

Jefferies said, “Pine Labs is moving towards reducing its working capital requirements towards subscription fee settlements, as well as ICB, through early reconciliation and securitization.”

4. The sensitivity problem both stocks share

Here is the thing that both bulls and skeptics need to sit with. A 2% drop in contribution margin hits Paytm’s adjusted EBITDA by 9% and its profit by 10%. For Pine Labs, the same 2% drop causes a 6% impact on adjusted EBITDA and a 9% impact on profit. These are not small numbers. Both businesses carry high fixed indirect costs in the form of employee expenses, cloud infrastructure, and software, and that means operating leverage works both ways. Jefferies is, in effect, pointing out that the margin story is the key variable to watch across both names, and that any softening in contribution flows through to the bottom line much faster than a headline revenue miss might suggest.

Jefferies said, “Sensitivity to change in contribution is higher: a 2% reduction in contribution leads to a 9% impact on Adjusted Ebitda and 10% on profit.”

It added, “A 2% reduction in contribution leads to a 6% impact on Adjusted Ebitda and 9% on profit.”

5. Valuation and what the numbers are pricing in

Paytm’s valuation is built on 39 times March 2028 estimated adjusted EV by EBITDA, arriving at a target equity value of Rs 91,600 crore and a per-share target of Rs 1,350. At current prices of Rs 1,053.80, the stock is, in Jefferies’s view, pricing in healthy growth at 45 times FY27 adjusted EV by EBITDA, which the brokerage considers attractive given the trajectory. Pine Labs is valued at 26 times March 2028 adjusted EBITDA, leading to a target enterprise value of Rs 28,400 crore and a per-share target of Rs 260. At 20 times FY27 adjusted EV by EBITDA, Pine Labs looks cheaper on a near-term basis than Paytm, which partly explains why its implied upside at 58% is significantly higher than Paytm’s 28%.

Jefferies said, “Valuations reflect healthy growth at 45x FY27e adj. EV/Ebitda are attractive.”

It added, “Valuations at 20x FY27e adj. EV/Ebitda are attractive.”

6. Paytm vs Pine Labs: Where each stock could go wrong

The risks are meaningfully different for each. Paytm faces regulatory risk as fintech regulations in India are still being written, a concentration risk among its lending partners in the merchant lending segment, and the potential for UPI incentives to be discontinued entirely. On the upside, Paytm could benefit from merchant discount rate charges eventually being levied on larger merchant UPI transactions, or from non-banking financial company access to the credit on UPI opportunity opening up sooner than expected. For Pine Labs, the main vulnerability is a slowdown in mobile phone sales in India, since a significant portion of its equated monthly instalment on cards volumes are driven by electronics purchases. A broader slowdown in consumption credit activity, higher competitive intensity, or a slower international ramp could also drag on the story.

Jefferies said, “Risk can be from discontinuance of UPI incentive and upsides can come from MDR on larger merchant UPI payment volumes.”

It added, “Risk can come from slowdown in sale of mobile phones, with the impact potentially mitigated by stronger summer-linked electronic sales, new partnerships and expansion.”

Conclusion

Paytm is the larger, more complex platform with a lower margin base and a higher earnings sensitivity. However, it has a broader set of growth levers, from merchant lending to credit on UPI to wealth management. Its 28% upside reflects a business that still has significant operating leverage to extract as it matures. Pine Labs is a tighter, higher-margin operation that is already profitable in FY26, is compounding earnings rapidly, and is trading at a cheaper near-term multiple, as per Jefferies.

Both carry the same core risk, that contribution margins are sensitive and any softening hits earnings harder than the headline revenue miss might suggest. Jefferies is betting that neither company slips on that front and that the stocks year-to-date cirrection have created genuinely attractive entry points in both cases.

Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.