Domestic brokerage firms YES Securities has upgraded One 97 Communications Ltd (Paytm) for the first time since it has started covering the stock.
Domestic brokerage firm YES Securities has upgraded One 97 Communications Ltd (Paytm) for the first time since it has started covering the stock. The stock has seen a sharp sell-off after RBI ordered the fintech player to wind up its Paytm Payments Bank (PPBL) over various compliance issues.
YES Securities said that Paytm’s dependence on the Wallet business for revenue had already declined materially to only about one-sixth of payments revenue. The wallet business had declined to Rs 1,000 crore out of Rs 6,000 crore revenue. Hence, the damage will not have a particularly outsized impact.
The NPCI approval to Paytm to participate in UPI as a third-party application provider (TPAP) in the multi-bank model keeps its UPI business intact, said YES Securities. Under the multi-bank model, OCL has tied up with Axis Bank, HDFC Bank, State Bank of India (SBI) and YES Bank and the @paytm UPI handles move en masse to YES Bank, ensuring no disruption to the UPI business.
The brokerage said that Client loss due to reputational damage and on-ground confusion will be well contained. However, OCL is now communicating energetically to ensure client loss remains well contained and will also look to recoup clients that may have departed to other app platforms, it said.
“Loan distribution has undergone a reset but partner addition will be supportive,” said YES Securities. “However, loan distribution will resume in the short-term but BNPL will remain suspended till comfort is regained from a regulatory standpoint. Structurally, growth will be driven by lending partner addition alongside same partner growth.”
YES Securities also said that the both Wallet and BNPL businesses are under cloud, the past successes underline the competitive DNA of Paytm as an organisation. “Having received feedback from the regulator and undergone a de-risking process, we now believe that a less volatile future lies ahead for Paytm,” it said.
“We value OCL at 2.7 times FY25E P/S for an FY28-31E EPS CAGR of 78 per cent. We have not assumed any rehabilitation of OCL’s Wallet business in our assumptions. We have assumed a relatively constrained outlook for the loan distribution business. The market is currently pricing in an even more acute scenario,” YES Securities added with a ‘buy’ rating and a target price of Rs 505.
Shares of One 97 Communications (Paytm) settled at Rs 370.90 on Friday, after hitting an upper circuit of 5 per cent. The company was commanding a total market capitalization of more than Rs 23,500 crore. The stock has corrected about 63 per cent from its 52-week high at Rs 998.
NPCI’s grant TPAP approval under multi-bank model is a positive development and in-line with expectations, said Morgan Stanley. “We continue to await an update on potential impact to Paytm’s businesses during February 24, and updated commercials for it as Paytm Payment Bank’s business moves to other banks. The global brokerage has an ‘equal-weight’ rating with a target price of Rs 555.
Disclaimer: rojgarlive Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
Disclaimer: rojgarlive Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
