Paytm Shares Rise 4% Despite Q2 Profit Drop — Here’s What’s Driving Investor Optimism

Paytm shares climbed nearly 4% in early trade on Wednesday, even as the company reported a sharp decline in profits for the second quarter of FY26. The stock opened strong and was trading at around ₹1,318 on the Bombay Stock Exchange, signalling that investors remain optimistic about the company’s core business trajectory despite headline numbers showing a year-on-year fall.

Paytm’s parent company, One 97 Communications, posted a net profit of ₹21 crore for the July–September quarter, a significant drop from the exceptionally high ₹939 crore profit recorded during the same period last year. However, last year’s figure had included a one-off gain of ₹1,345 crore from the sale of its movie ticketing and events vertical to Zomato, making the year-on-year comparison misleading.

Stripping out exceptional items, the company’s operational performance showed clear improvement. Revenue from Paytm’s core businesses grew 24% year-on-year to ₹2,061 crore, driven by strong growth in payment services, merchant subscriptions, and financial products distribution. The company also maintained tight control over expenditure, with total expenses falling more than 8% from last year as Paytm continues to streamline operations and improve efficiency across business verticals.

A one-time impairment charge of ₹190 crore weighed on the quarter’s profitability after Paytm wrote down its entire investment in First Games Technology Private Limited. The write-off followed the implementation of the Promotion and Regulation of Online Gaming Act 2025, which banned online gaming activities, rendering the joint venture non-viable.

Despite these setbacks, investor sentiment remained upbeat. Market participants appear to be looking past accounting adjustments and focusing on Paytm’s strong underlying business fundamentals. The company has posted steady revenue growth, improved margins, and better cost discipline over the past few quarters — trends that investors interpret as signs of a sustainable turnaround.

A major additional boost came from global index provider MSCI’s announcement that Paytm will be added to its Global Standard Indexes from November 24. This inclusion is expected to attract substantial foreign inflows, as global passive funds benchmarking these indexes adjust their portfolios. Analysts estimate that Paytm, alongside three other Indian companies, could collectively draw inflows of approximately $1.46 billion into the domestic market.

While Paytm continues to navigate regulatory challenges, especially in segments that face increased scrutiny, the recent combination of operational improvement, index inclusion, and investor confidence has helped push the stock higher. The coming quarters will be crucial in determining whether the company can maintain this momentum and translate it into sustained financial gains.