Stating that the valuation could vary on the basis of merchant/user attrition to the tune of 10-30% and a hit to net revenues of 20-45%, Jefferies said the news on regulatory actions on other pending issues is still incoming. “We move to Not Rated (from underperform) until the news flow settles down,” said Jefferies analysts Jayant Kharote and Prakhar Sharma.
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The classification of ‘Not rating’ means that Jefferies has temporarily suspended the investment rating and price target of the stock. But it hasn’t yet suspended coverage on Paytm.
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In a relief to Paytm, RBI has extended the deadline for the ban on Paytm Payments Bank from February 29 to March 15 but did not provide any respite on the transition of wallet/FASTag accounts to any potential buyer.
“Hence, it removes any option of sale/transfer of said business and effectively signals the closure of the wallet business (incl. FASTags), affecting FY25E EBITDA by ~20%,” Jefferies said, adding that in case of no incremental regulatory clampdown, there could be multiple scenarios for the business depending on user/merchant retention.
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Regulatory actions are still developing with near-term clarity awaited on two key issues – RBI’s view on the method of transition for VPA handle of Paytm users and the outcome of Enforcement Directorate investigations, it said. In the medium term, government approval for payment aggregator license to subsidiary PPSL will be key to monitor.Last week, Paytm announced the onboarding of Axis Bank which will host nodal accounts or escrow accounts in place of Paytm Payments Bank.
Without a banking license, Paytm’s business model will now become similar to pure payment service providers like PhonePe, GPay, Pine Labs, etc, the analysts said.
Citi has also maintained a sell rating with a target price of Rs 550 per share, saying that the fintech may see elevated user and merchant churn in the near term.
Bernstein finds the RBI’s update on action against Paytm as incrementally positive though still short on the finer details. The brokerage, which has an outperform rating with a target price of Rs 600 on Paytm, said RBI’s actions appear to be limited to PPBL and not intended at disrupting the UPI payments and other functions of Paytm.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)