Shares of One 97 Communications Ltd, the parent company of Paytm, surged 5 percent and hit the upper circuit on February 26, marking the sixth time in the past seven sessions, as it continued to rebound from its all-time low of Rs 318.05 following RBI’s restrictions on its banking arm.
Closing at Rs 428.10 on the National Stock Exchange, Paytm witnessed a 4.99 percent increase from the previous close, contributing to its ongoing recovery.
Despite the recent uptrend, the market capitalization of the payment major remains 30 percent lower than January 31, when the central bank issued a circular regarding Paytm Payments Bank. Year-over-year, the stock is down by 33 percent.
The recent surge follows positive developments surrounding the RBI’s actions on Paytm Payments Bank. The RBI advised the National Payments Corporation of India (NPCI) to consider Paytm’s request to become a third-party application provider (TPAP), potentially ensuring uninterrupted UPI services for Paytm customers.
Moreover, the central bank recommended that if NPCI grants TPAP status to One97 Communications, it could facilitate the seamless migration of ‘@paytm’ handles from Paytm Payments Bank to a newly identified set of banks to prevent disruption.
However, analysts remain cautious. Asutosh Mishra, head of research at Ashika Stock Broking, advises against investing in Paytm, citing more attractive opportunities available in the market. Mishra suggests staying away from Paytm until all regulatory issues are resolved, recommending exploration of promising opportunities in the BFSI space for more stable and profitable investments.
Goldman Sachs recently downgraded Paytm’s stock to “neutral” and reduced the target price to Rs 450 from Rs 860, reflecting concerns about potential market share loss in the payments sector. They anticipate a lending slowdown due to RBI’s restrictions on the payments bank, leading to adjustments in revenue and adjusted EBITDA estimates for FY24E-26.
While several brokerages downgraded Paytm shares post-RBI action, Bernstein remains bullish on the stock.
