Paytm shares at Rs 695? What Morgan Stanley says on wallet interoperability

Morgan Stanley said the guidelines on full interoperability of KYC wallet could lead to additional revenues and some higher wallet loading charges of Paytm Payments Bank. One97 Communications (Paytm) owns 49 per cent in Paytm Payments Bank.

In its latest note, Morgan Stanley, which has a target of Rs 695 on Paytm, said  it sees additional revenues for Paytm Payments Bank when Paytm's full KYC wallet customers transact using their wallets on merchants acquired by other service providers.

NPCI on March 24 announced full interoperability of KYC wallets (PPIs), fixing the interchange for using PPIs on UPI at up to 1.1 per cent of transaction value for amount above Rs 2,000. This is effective April 1.

Following the development, Paytm Payments Bank on Monday said that from now on its KYC wallet customers can make payments on every UPI QR code and online merchant where UPI payments are accepted.

On Tuesday, the scrip stood at Rs 630 apiece, up 1.4 per cent. Morgan Stanley's price target suggests a 10 per cent potential upside for the stock.

"The exact revenue benefit will be a function of Paytm wallet usage on non-Paytm  QRs/online merchants and respective MDRs. If well adopted by Paytm wallet users/merchants, the benefit could be meaningful,as Paytm Payments Bank is the largest issuer of KYC wallets with over 100 million users," Morgan Stanley said.

On the other hand, Morgan Stanley said the cost of wallet loading service charges that Paytm Payments Bank would have to pay to the remitter bank would be 15 bps for transactions above Rs 2,000 that are done via UPI,as opposed to nil now.

For Paytm, Morgan Stanley said the interchange paid to Paytm Payments Bank would be lower, in line with the lower standardised interchange. That said, this implies lower revenues at Paytm Payments Bank, Morgan Stanley said.

"We await clarity from management on the net positive impact from the above guidelines. As of now, it is difficult for us to quantify the potential impact given limited available data as well as lack of clarity on potential Paytm wallet adoption at other merchants," Morgan Stanley said.

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