(Bloomberg) -- The brokerage with the most bearish call on India’s Paytm is now calling for the stock to outperform as the fintech firm shows prospects of turning profitable. Shares rose for a third day. 

Macquarie Capital Securities (India) Pvt., which had kept an underperform call on the stock since its listing until the “double upgrade” on Wednesday, has set an 800 rupees target for the shares. The shares rose as much as 19% to 698 rupees in Mumbai but pared some gains to trade 14.5% higher as of 2:43 p.m in Mumbai.

The firm is joining seven other brokerages that have either a buy or overweight recommendation on One 97 Communications Ltd., the parent company of the fintech firm. Shares are up more than 40% since a record low in November, with gains accelerating this week after reports in the Indian media that the government had banned dozens of Chinese rivals.


“Since our last downgrade, Paytm has positively surprised on the distribution of financial services revenues by a wide margin and has also managed to control overall expenses and charges,” analysts Suresh Ganapathy and Param Subramanian wrote in a note. “We were earlier expecting losses to continue but at current rate of revenues and operating leverage kicking in, we expect accounting profits to be delivered by full-year 2026.”

The company posted a narrower third-quarter loss after its drive to add customers boosted revenue, it said in an exchange filing last week. Revenue from operations rose 42% to 20.6 billion rupees, while total costs climbed at a slower pace, according to the filing.

Paytm has never traded above its IPO price of 2,150 rupees since its listing in Nov. 2021 and had the worst first-year share plunge among large IPOs over the past decade. At the time of the offering, Macquarie had a view that price-to-sales valuation for the startup was expensive, with profitability elusive for a long time.  

Among the remaining risks for the stock are risks related to competition, regulatory issues and corporate governance, the analysts wrote in the report. 

--With assistance from Akshay Chinchalkar and Ashutosh Joshi.

(Updates stock prices in second paragraph.)

©2023 Bloomberg L.P.