Shares of One 97 Communications Ltd, the parent company of Paytm, hit an upper circuit of 5 per cent at the opening tick of Friday. The fintech counter was locked in the buyer's circuit at Rs 370.90 for the day, commanding a total market capitalization of more than 23,500 crore. The National Payments Corporation of India (NPCI) gave approval to One97 Communications to participate in UPI services as a third-party application provider under a multi-bank model on Thursday, March 14. Under the new model, Paytm will provide the payment service in partnership with four new banks—Axis Bank, HDFC Bank, State Bank of India, and Yes Bank. “@Paytm” handle shall be redirected to YES Bank, enabling existing users and merchants to continue to do UPI transactions and autoPay mandates in a seamless and uninterrupted manner, said the company in an exchange filing. "Paytm has been advised to complete migration for all existing handles and mandates, wherever required, to new PSP banks at the earliest," it said. The global brokerage firms said that NPCI's order has removed the last remaining regulatory challenge for ensuring a smooth transition of customers and merchants. However, the brokerage said that it awaits clarity on user/merchant retention and path to normalization for lending business. However, the February 2024 news flow and data points to hit the payment value and/or app usage by 8-15 per cent, said Jefferies. "The company's business model is moving to a pure payment company. Paytm is likely to dip into less than $1 billion cash reserve for merchant/customer retention," it added.
Another brokerage Morgan Stanley said that NPCI approval to act as third party application providers (TPAP) under multi-bank model is a postive development and is in-line with the expectations. It is awating update on potential business imact on its business during February 2024 The oveseas brokerage has maintained an 'equal-weight' rating on Paytm with a target of Rs 555.