Shares of Paytm’s parent company One97 Communications opened at a 52-week high on Wednesday, August 13. The Reserve Bank of India (RBI) has granted ‘basic approval’ to Paytm Payments Services Limited (PPSL), a wholly-owned subsidiary of Paytm, to operate as an ‘online payment aggregator’.
Shares of Paytm’s parent company One97 Communications opened at a 52-week high on Wednesday, August 13. This happened after the Reserve Bank of India (RBI) granted ‘basic approval’ to Paytm’s wholly-owned subsidiary Paytm Payments Services Limited (PPSL) to operate as an ‘online payment aggregator’.
Extent and conditions of approval
This approval is limited to PA functions only. Transactions outside the scope of PA guidelines (such as ‘payments-out’ to merchants) cannot be done through escrow accounts created for PA functions.
RBI has directed PPSL to conduct a comprehensive systems audit, including a cybersecurity audit. This audit should be conducted by a CERT-In accredited auditor, a qualified Certified Information Systems Auditor (CISA) or a DISA-certified professional.
The audit will also check compliance with the Master Guidelines on Cyber Resilience and Digital Payments Security Controls for Non-Bank Payment System Operators and the RBI circular on ‘Storage of Payment System Data’.
The audit report has to be submitted to RBI within six months from the date of the letter, failing which the original approval will automatically expire.
PPSL has also been directed to seek prior approval of RBI in case of any change in shareholding or ownership.
I said earlier that it won’t have any effect
When this ban was imposed in 2022, Paytm management had said that it would not have any significant impact on the business as it was applicable only on adding new online merchants.
The burden of Chinese investors has also been removed
The pressure of the presence of Chinese company Antfin on Paytm has also ended recently. Antfin also sold its remaining stake in the company through a block deal. Like Warren Buffett’s Berkshire Hathaway, Antfin also sold its stake in Paytm at a loss.
Citi Group: Buy with a target of ₹1,215
Citi Group has maintained a ‘buy’ rating on Paytm and set a target price of ₹1,215. Citi says that getting the license after almost three years is positive for sentiment as it removes a major regulatory restriction on the business. Now Paytm can take advantage of its size and product development capability to become more competitive.
Bernstein: ‘Outperform’ with target price ₹1,100
Bernstein has an ‘outperform’ rating and a target price of Rs 1,100 (lower than Tuesday’s close). Bernstein calls this an important and positive development. He says the immediate impact will be limited, but it is still a big relief. “Over time, this should improve payment margins, as it can now add a long queue of smaller merchants who typically offer much higher margins than large corporate customers,” he said.
Buy, Sell or Hold Paytm
Overall, out of the 19 analysts tracking Paytm, 10 have a ‘buy’, five have a ‘hold’ and four have a ‘sell’ opinion. The highest target is set by Dolat Capital at ₹1,400.
Performance of stocks
Today, i.e. Wednesday, Paytm shares opened at ₹ 1,167.90, which is 4.3% higher than the previous closing price. The stock has risen 15% in the last one month and has registered a gain of about 50% in the last six months.
The stock hit a new 52-week high on Wednesday morning, but is still below its IPO price of ₹ 2,150.
( Disclaimer: Experts’ recommendations, suggestions, views and opinions are their own and not of businessleague. Investing in the stock market is subject to risks and consult your advisor before investing.)
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