A BofA Global Research report highlights that Paytm has one of the lowest employee stock ownership plan (ESOP) costs among listed new-age technology companies. Its ESOP expense was 1.6% of revenue in H1 FY26, significantly lower than peers like PhonePe (46%), Pine Labs (7.5%), and Urban Company (6.4%).
This lower stock compensation burden contributes to a leaner cost structure, which has coincided with Paytm's return to profitability and positive cash flow. The report also notes Paytm's strategic shift towards higher-margin revenue segments like financial services, further strengthening its earnings profile.
The main topics covered are Paytm's low ESOP costs compared to industry peers, the financial benefits of this cost structure, and the company's broader business model shift towards profitability.
Noida-based payments major Paytm has one of the lowest employee stock ownership plan (or ESOP) costs in the industry and spends low proportion of its revenue on stock compensation among listed new-age technology companies, according to a report by BofA Global Research.
The brokerage report noted that Paytm's ESOP cost stood at about 1.6% of revenue in the first half (H1) of FY26, which is lower than several internet and fintech peers.
In contrast, the report highlighted that ESOP payouts at some new-age companies including the likes of PhonePe, Pine Labs, Urban Company, account for a materially higher share of revenue, weighing on reported revenues.
ESOP expense reflects the cost of stock-based compensation granted to employees and is recorded as part of operating expenses. A lower ESOP-to-revenue ratio indicates that a smaller portion of a company's income is being allocated toward stock compensation, helping improve margins and earnings visibility.
Crucially, while these ESOPs represent a non-cash accounting charge, they serve as a strategic tool to retain manpower talent by aligning employee interests with long-term shareholder value.
The BofA report shows a sharp gap at the top end of ESOP spending. PhonePe's ESOP cost stood at 46% of revenue in H1 FY26, the highest among the companies tracked. Pine Labs followed at 7.5%, while Urban Company reported 6.4 per cent. Swiggy's ESOP cost was 4.9% of revenue for the same period.
In comparison to these levels, Paytm's ESOP-to-revenue ratio at 1.6% remains on the lower side in the new-age technology pack, highlighting a far lighter stock compensation burden.
It recorded an ESOP expense of Rs 65 crore in H1 FY26, significantly lower in absolute as well as percentage terms compared with several peers.
This strengthening cost structure has coincided with Paytm's return to profitability at the net level and positive cash flow from operations.
The company has reported three consecutive profitable quarters, with net profit standing at Rs 225 crore in Q3 FY25 (quarter ended December 2025) reflecting improving operating leverage and financial discipline.
The brokerage also noted that Paytm compares more favourably on operating expenditure relative to rivals.
Despite operating at a comparable scale, the company has maintained tighter control over costs, resulting in a leaner expense structure as highlighted in the BofA report.
Beyond cost discipline, Paytm's first-mover advantage in merchant monetisation and lending, along with its diversified business model, has consistently supported margin expansion.
The company has steadily reduced its dependence on low-monetisation consumer payments. Today, payments account for 55% of total revenues in H1 FY26 for Paytm, while the balance came from higher-margin segments such as financial services distribution, insurance and broking.
This calibrated shift toward high-yield verticals, combined with tighter control over equity-linked compensation, has strengthened Paytm's overall earnings profile and improved operating leverage.
The brokerage report noted that Paytm's ESOP cost stood at about 1.6% of revenue in the first half (H1) of FY26, which is lower than several internet and fintech peers.
In contrast, the report highlighted that ESOP payouts at some new-age companies including the likes of PhonePe, Pine Labs, Urban Company, account for a materially higher share of revenue, weighing on reported revenues.
ESOP expense reflects the cost of stock-based compensation granted to employees and is recorded as part of operating expenses. A lower ESOP-to-revenue ratio indicates that a smaller portion of a company's income is being allocated toward stock compensation, helping improve margins and earnings visibility.
Crucially, while these ESOPs represent a non-cash accounting charge, they serve as a strategic tool to retain manpower talent by aligning employee interests with long-term shareholder value.
The BofA report shows a sharp gap at the top end of ESOP spending. PhonePe's ESOP cost stood at 46% of revenue in H1 FY26, the highest among the companies tracked. Pine Labs followed at 7.5%, while Urban Company reported 6.4 per cent. Swiggy's ESOP cost was 4.9% of revenue for the same period.
In comparison to these levels, Paytm's ESOP-to-revenue ratio at 1.6% remains on the lower side in the new-age technology pack, highlighting a far lighter stock compensation burden.
It recorded an ESOP expense of Rs 65 crore in H1 FY26, significantly lower in absolute as well as percentage terms compared with several peers.
This strengthening cost structure has coincided with Paytm's return to profitability at the net level and positive cash flow from operations.
The company has reported three consecutive profitable quarters, with net profit standing at Rs 225 crore in Q3 FY25 (quarter ended December 2025) reflecting improving operating leverage and financial discipline.
The brokerage also noted that Paytm compares more favourably on operating expenditure relative to rivals.
Despite operating at a comparable scale, the company has maintained tighter control over costs, resulting in a leaner expense structure as highlighted in the BofA report.
Beyond cost discipline, Paytm's first-mover advantage in merchant monetisation and lending, along with its diversified business model, has consistently supported margin expansion.
The company has steadily reduced its dependence on low-monetisation consumer payments. Today, payments account for 55% of total revenues in H1 FY26 for Paytm, while the balance came from higher-margin segments such as financial services distribution, insurance and broking.
This calibrated shift toward high-yield verticals, combined with tighter control over equity-linked compensation, has strengthened Paytm's overall earnings profile and improved operating leverage.
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