Shares of One 97 Communications, the parent company of fintech platform Paytm, traded above Rs 410 on the National Stock Exchange (NSE) intraday on March 22, rebounding around 32 per cent from its 52-week low of Rs 318.35 hit in February, and maintaining its gradual recovery in this period.
Paytm recently received the National Payments Council of India (NPCI) approval to function as a third-party app, which will enable it to work like its peers Google Pay and PhonePe. The company has also tied up with Axis Bank, HDFC Bank, SBI, and Yes Bank to ensure smooth business migration.
Although the fintech grapples with the impact of RBI action on the Paytm Payments Bank (PPBL), Motilal Oswal sees a 30 per cent upside in the stock.
“We anticipate a further decline in UPI transaction volume and value data in March 2024 as well. We review our numbers and estimate payment processing margin to decline as the mix of high-yielding wallet business declines sharply, while the impact on financial business (loan origination volumes) further suppresses revenue growth and profitability,” said the domestic brokerage.
However, Paytm has recently received NPCI approval to function as a third-party app provider (TPAP), which will enable it to work like its peers, Google Pay and PhonePe. Paytm has tied up with Axis Bank, HDFC Bank, SBI, and YES Bank to ensure smooth business migration.
“We remain watchful on the ongoing business transition and Paytm’s ability to recover lost business and resume growth trajectory over FY25- 26E. We thus estimate FY25E revenue to decline by 24 per cent, while contribution profit declines 30 per cent. We estimate contribution margin to sustain at 51 per cent over FY25E,” MOSFL said.
Motilal Oswal has revised its target price to Rs 530 based on 15 times FY28E EV/Ebitda discounted to FY26. The brokerage firm will revisit its rating post fourth-quarter results and in the interim maintain its ‘neutral’ stance on the stock. The brokerage sees up to 30 per cent upside in the from its previous close.
Comments
0 comment