“Given the still depressed valuation and the removal of a major regulatory overhang, we see considerable upside and maintain our Outperform rating with a Target Price of Rs 600,” said Pranav Gundlapalle of Bernstein, adding that the regulatory actions are restricted to Paytm Payments Bank (PPBL). He expects One 97 to successfully execute the operational changes required to remove the dependency on PPBL with limited long-term impact to their overall business.
Also read | Bottom fishing? Morgan Stanley buys 0.8% stake in Paytm via open market for Rs 244 crore
With the PPBL’s products such as wallets and Fastags set to drop, the brokerage estimates a 5% decline in payment GMV and the worst case impact of 4 bps on the payments processing margin from 9 bps currently, if the economics for Paytm doesn’t change significantly from switching to a non-PPBL partner.
“Our analysis of app traffic data indicates 10% reduction in traffic, and we expect limited damage to the long-term user/merchant base,” Gundlapalle said.
While Jefferies has moved Paytm to its list of ‘Non Rated’ stocks, Morgan Stanley has maintained an equal-weight rating with a target price of Rs 555.As compared to its all-time low of Rs 318.35, which was hit last Friday morning, the stock is up around 24%.Last week, RBI extended the ban by 15 days on Paytm Payments Bank’s key banking/wallet operations, except for nodal accounts. The regulator has further clarified that, in the case of merchants accepting payments using a Paytm QR code, Paytm soundbox, or Paytm POS terminal, services will not be disrupted (even post mid-March 2024) if the linked account is with any other bank (except PPBL).
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