Paytm shares up 5% on receiving nod for investment in PPSL; here are target prices

Shares of One 97 Communications Ltd (Paytm) climbed 5 per cent in Thursday's trade, as it received approval for downstream investment in a wholly-owned subsidiary Paytm Payments Services (PPSL). Paytm also showed intension to reapply for a payment aggregator (PA) licence. Analysts see diminishing regulatory concerns as positive for Paytm.

"We would like to inform you that PPSL has received approval from the Government of India, Ministry of Finance, Department of Financial Services, vide its letter dated August 27, 2024, for downstream investment from the company into PPSL. With this approval in place, PPSL will proceed to resubmit its PA application," Paytm said. 

Paytm shares climbed 5 per cent to hit a high of Rs 565 on BSE. It was later trading 1.38 per cent higher at Rs 545.50. 

Paytm said PPSL will continue to provide online payment aggregation services to existing partners. "We remain committed to a compliance-first approach and upholding the highest regulatory standards. As a homegrown Indian company, Paytm is focused on contributing to and advancing the Indian financial ecosystem," it said.  

Morgan Stanley has maintained its 'Equal-Weight' on the Paytm stock with a target of Rs 500. The fresh development is seen as reducing regulatory overhang. Jefferies has maintained a "Hold' call with a target price of Rs 420. If granted approval from RBI, Paytm will be able to onboard new online merchants. The immediate business impact could be marginal, Jefferies reportedly said.

Ventura Securities has come out with a research note on One 97 Communications Ltd (Paytm) saying the stock can more than double to Rs 1,170 over the next 24 months, as per its base case assumptions. The domestic brokerage suggested a target price of Rs 1,444 per share in its bullish case scenario, which hints at a nearly three-fold jump in the stock price. Even with its bear case assumptions, Ventura finds the stock worthy of Rs 870 level.

Over FY24-27, Ventura expects Paytm's revenue to grow at a CAGR of 14.1 per cent to Rs 14,531 crore, contribution profit 15.6 per cent to Rs 8,301 crore and pre-ESOP Ebitda 54.5 per cent to Rs 1,829 crore.

Besides, it sees post-ESOP Ebitda and net earnings are expected to turn profitable, with forecasts of Rs 1,379 crore and Rs 1,388 crore by FY27, compared to losses of Rs 908 crore and Rs 1,417 crore in FY24.

"This growth is expected on the back of GMV (payment services + devices) fuelling to Rs 32.1 lakh crore (21.9 per cent CAGR), and more than 4 times growth in loan disbursals and doubling of revenues from marketing services. The Paytm Wallet, FASTag, BNPL and house rental payments which were discontinued are expected to resume once the cloud of RBI’s stricture gets cleared," it said.