The stock of One97 Communication advanced 5% to hit the upper band of Rs 370.70 a day after the company got the approval from NPCI to act as a third-party UPI app under the multi-bank model, just like its rivals PhonePe and Google Pay. Axis, HDFC, SBI and YES Bank will be the payment service provider banks and YES Bank will be acting as the merchant acquiring bank for both existing and new UPI merchants.
“YES Bank shall also be acting as merchant acquiring bank for existing and new UPI merchants for OCL. “@Paytm” handle shall be redirected to YES Bank. This will enable existing users and merchants to continue to do UPI transactions and AutoPay mandates in a seamless and uninterrupted manner,” NPCI said in a statement.
Paytm has also been advised by NPCI to complete migration for all existing handles and mandates to new PSP banks at the earliest.
Analysts as Jefferies India Pvt Ltd said that the development removes the last remaining regulatory challenge for ensuring a smooth transition of customers and merchants.
The share price of Paytm has seen a steep fall of more than 50% post Reserve Bank of India’s regulatory action. Significant restriction had been placed by RBI on One 97 Communications’ partner entity, Paytm Payments Bank Limited (PPBL). Following these restriction after March 15, 2024, Paytm Payments Bank was no longer liable to accept new deposits into its users’ wallets and accounts. However on February’ 23, 2024, the RBI had advised NPCI to review One97 Communication Ltd’s application to become a Third-Party Application Provider (TPAP) for UPI channel in order to ensure that the Paytm app continues to operate using UPI in accordance with regulations.
While the move will make it possible for Paytm to function similarly to its competitors, analysts say that the attention of investors may move away from the from regulatory obstacles to operational performance.
However analysts at Jefferies India said that they will be await clarity on user/merchant retention and path to normalization for lending business.
“Paytm’s focus will now move to ensuring customer/merchant retention, and we believe it will dip into its ~Rs8500 Crore cash reserves for spends on retaining users”, said analysts at Jefferies.
Further, depending on user/merchant retention and in the absence of an incremental governmental crackdown there could be several possible outcomes for the firm.
Analysts at Jefferies said that the path to normalization for the lending business (which has been partly suspended) will provide clarity on the revenue/EBITDA trajectory. They see both positive and negative risks arising from user/merchant retention, revenue traction, and cost controls. Analysts also remain watchful for clarity on attrition numbers and the path to normalization for the lending business.
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