One97 Communications’ Advisory Committee, Formed Post RBI Action, Awaits Deeper Engagement with Company to Address Issues.
Paytm’s Stock Hits 5% Upper Circuit, Continuing Previous Week’s Gains as Morgan Stanley Maintains Equal-Weight Rating.
At 9:18 am, the stock was trading at Rs 426.60 on NSE.
This follows the Reserve Bank of India’s (RBI) directive to the National Payments Corporation of India (NPCI) to review Paytm’s request to serve as a third-party application provider (TPAP). Approval from NPCI would guarantee uninterrupted UPI services for Paytm customers.
The central bank has additionally recommended that if NPCI grants TPAP status to parent company One97 Communications, it may be mandated that ‘@paytm’ handles are seamlessly migrated from Paytm Payments Bank to a new set of identified banks to prevent any disruption.
Investors are eagerly awaiting NPCI’s response and further updates from Paytm regarding the potential impact on its business in February 2024.
Meanwhile, the advisory committee, established by One97 Communications following RBI’s action on its payments bank business, has yet to engage deeply with the company to identify any issues. M. Damodaran, the head of the panel and former chairman of Sebi, stated on February 25 that they are external advisers. He further commented that at this stage, Paytm is primarily engaging with the RBI in response to the impact of the RBI’s January 31 order on Paytm Payments Banks Limited (PPBL).
“Paytm Stock Sees Volatility Following RBI’s PPBL Crackdown: Recovers from 52-Week Low but Still 46% Below Pre-Crackdown Levels”
“After RBI’s crackdown on PPBL on January 31, Paytm stock plummeted by approximately 60%, only to experience a modest rebound with four instances of hitting the 5% upper circuit last week.”
While Paytm has managed to regain some ground, trading 27% above its February 16 low of Rs 318, the fintech stock remains 46% below its pre-crackdown closing price of Rs 761.20.
Goldman Sachs recently downgraded the stock to ‘neutral’ and slashed the target price from Rs 860 to Rs 450 per share. This adjustment reflects concerns about potential market share loss in the payments sector.
Furthermore, Goldman Sachs foresees a near-term lending slowdown following a recent RBI directive imposing strict restrictions on PPBL.
As a result, Goldman Sachs analysts have revised down revenue and adjusted EBITDA estimates for FY24E-26 by up to 36% and 80% respectively. They now anticipate a 21% year-on-year revenue decline in FY25, compared to the previous forecast of 16% growth.
While many brokerages have downgraded Paytm stock post-RBI action, Bernstein maintains bullish stance.
Despite recent developments, Bernstein sees potential upside, citing depressed valuation and resolution of regulatory concerns specifically related to Paytm Payments Bank (PPBL).
Bernstein maintains an Outperform rating with a target price of Rs 600, emphasizing that regulatory actions are confined to PPBL.
Analysts anticipate Paytm will effectively implement operational changes to reduce reliance on PPBL, expecting limited long-term impact on overall business.
Disclaimer: The opinions and investment recommendations provided by investment experts are solely their own and do not necessarily reflect the views or opinions of the website or its management. Bystox strongly advises users to consult certified financial experts before making any investment decisions.