The RBI letter mentioned that merchant onboarding restrictions placed on PPSL in November 2022 have been withdrawn, but the firm has been authorised to undertake a system audit, including one for cybersecurity.
The audit report will have to be submitted to the RBI within six months and in case that does not happen, the in-principle authorisation will lapse automatically and the grant of a final authorisation will not be considered thereafter, according to the regulator’s letter.Earlier, when the ban was imposed, the management of Paytm had stated that this will have no material impact on the business since it is only applicable on the onboarding of new online merchants.
Paytm has recently seen the exit of the Chinese overhang, when Antfin sold its remaining stake in the company via block deals. Similar to Warren Buffett’s Berkshire Hathaway, Antfin too sold its stake in Paytm at a loss.
Brokerage firm Citi has a “buy” rating on Paytm with a price target of ₹1,215. It stated that the license win after nearly three years is a positive for sentiments as it lifts a major regulatory restriction on its business.With the restriction now lifting, Paytm can leverage its relative scale and product development capabilities to be more competitive, Citi said.
Bernstein has an “outperform” rating on Paytm with a price target of ₹1,100, which is below Tuesday’s closing price for Paytm.
Calling this a significant and positive development, Bernstein said that there will be a limited immediate impact but it counts as a major relief nonetheless.
“Over time, this should support higher payment margins, as it can now onboard the long tail of smaller merchants that typically yield much higher margins than large enterprise clients,” Bernstein said.
Out of the 19 analysts that have coverage on Paytm, 10 of them have a “buy” rating, five say “hold”, while four have a “sell” rating. The highest price target on the street for Paytm is by Dolat Capital, who sees the stock at ₹1,400.
Shares of Paytm have opened 4.3% higher on Wednesday at ₹1,167.9. The stock has risen 15% in the last one month, and nearly 50% in the last six months. The stock has made a new 52-week high in early trading on Wednesday, but remains below its IPO price of ₹2,150.
