RBI asking subsidiary to resubmit payment aggregator license won't affect Paytm, brokerages maintain "Buy" rating
Nov 28, 2022
New Delhi [India], November 28 : As the Reserve Bank of India (RBI) directed Paytm Payment Services Limited, a subsidiary of Paytm, to reapply for a payment aggregator license in 120 days, analysts have said that the move will not have any impact on Paytm and they believe the company will deliver robust growth.
"Since observations pertain primarily to submitting additional data, we do not expect any impact from this notice, and expect Paytm to continue business as usual and deliver high growth from its existing businesses," said Dolat Capital in a note.
Dolat Capital also gave a "Buy" rating for Paytm stocks with a target price of Rs 1,400. Currently, the shares are trading at Rs 467.
Further, brokerage firm Citi expects a "limited loss" of market share in online payments as a payment gateway business (can't onboard new customers but can continue to work with existing ones until a license is granted).
"In addition to the ongoing restrictions on onboarding new wallet customers (since Mar'22), the new developments show regulatory hiccups continue, although the latter restrictions on onboarding new wallet customers haven't impacted business significantly (Paytm has added +13mn monthly transacting users (MTU) FYTD," Citi said.
Citi too gave "Buy" rating with a share target price of Rs 1,055.
Multiple brokerages including the likes of Goldman Sachs, BofA, Citi, Morgan Stanley, JP Morgan and ICICI Securities remain confident about Paytm's future growth potential in view of its strong financial performance over the last few quarters across key segments.
Sharing an update on the payment aggregator license on November 26, 2022, Paytm said in an exchange filing that the RBI has asked its subsidiary to take some steps and then reapply for the license within 120 days.
The RBI has asked Paytm to seek necessary approval for past downward investment from the company into its subsidiary to comply with FDI guidelines, besides asking it not to onboard new online merchants.
Upon receiving communication from the central bank, Paytm said that this will have no material impact on its business and revenues since the communication from RBI is only related to the onboarding of new online merchants. Paytm has said that it is hopeful of receiving the necessary approvals in a timely manner and resubmitting the application.
"We can continue to onboard new offline merchants and offer them payment services including All-in-One QR, Soundbox, Card Machines, etc. Similarly, PPSL can continue to do business with existing online merchants, for whom the services will remain unaffected," Paytm had said.
