Paytm may gain after new RBI announcement and Morgan Stanley ‘equal weight’ rating | Top Vip News

Paytm stock may extend the previous week’s gains on February 26 as Morgan Stanley maintained an equal weight call option on the stock with a target price of Rs 555 per share.

This comes after the Reserve Bank of India (RBI) advised the National Payments Corporation of India (NPCI) to examine Paytm’s application to be a third-party application provider (TPAP).

If approved by NPCI, this move would ensure uninterrupted UPI services for Paytm customers.

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The central bank further informed that in case NPCI grants TPAP status to parent One97 Communications, it may be stipulated that ‘@paytm’ handles be seamlessly migrated from Paytm Payments Bank to a set of newly identified banks to avoid any disruption .

Investors are now waiting for NPCI’s response and further updates from Paytm on the potential impact on its business in February 2024.

Meanwhile, an advisory committee, set up by One97 Communications after the RBI’s action on its payments banking business, is yet to engage deeper with the company to identify any issues, the panel’s head and former Sebi chairman M Damodaran. .

“We are an external advisor. Right now, they (Paytm) are dealing with the RBI,” Damodaran said in response to a question on the impact on Paytm of the RBI’s January 31 order on Paytm Payments Banks Limited (PPBL). .

Read also | RBI says ‘@paytm’ manages smooth migration from PPBL to other banks

Paytm shares took a hit after January 31 following the RBI’s crackdown on PPBL. It plunged around 60 percent before making a slight recovery by hitting the upper 5 percent circuit four days last week.

While Paytm has recovered losses to trade 27 percent above the 52-week low of Rs 318 hit on February 16, the fintech stock is still trading 46 percent below the January 31 closing price of Rs 761. .20 rupees.

In the last week, Goldman Sachs gave a ‘neutral’ rating to the stock and reduced the price target to Rs 450 from Rs 860 per share previously. This adjustment reflects the possible loss of market share in the payments sector.

Additionally, Goldman Sachs anticipates a slowdown in short-term lending due to a recent RBI directive imposing strict restrictions on Paytm Payments Bank (PPBL).

Consequently, analysts at Goldman Sachs have reduced revenue and adjusted EBITDA estimates for fiscal 24E-26 by up to 36 percent and 80 percent, respectively. They now expect FY25 revenue to decline 21 percent year-on-year, compared to the previous projection of 16 percent growth.

Read also | Paytm advisory panel chief says we still need to dig deeper to identify any issues with the company

While several brokerages have downgraded Paytm stock after the RBI action, and Jefferies has moved it to its list of “unrated” stocks, Bernstein remains bullish on the stock.

“Given the still depressed valuation and removal of significant regulatory overhang, we see considerable upside and maintain our outperform rating with a target price of Rs 600,” the brokerage said, adding that regulatory actions are limited to Paytm Payments Bank (PPBL). ).

Bernstein analysts expect Paytm to successfully execute the operational changes necessary to eliminate dependence on PPBL with limited long-term impact on its overall business.

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