Paytm crisis: Global brokerage firm Bernstein in its recent research report noted that RBI directive is only aimed at restricting the activities of Paytm Payments Bank Ltd. (PPBL) and not targeted at the other features of Paytm’s platform including UPI payments and loan distribution.
Paytm works with multiple banks along with its associate banks. The company has been working with other banks for the past two years and will now accelerate the plans and completely move to other bank partners.
The next phase of the company’s journey is to continue expanding its payments and financial services business, only in partnerships with other banks, it said.
On 1 February 2024, the founder and chief executive officer of the company, Vijay Shekhar Sharma said that Paytm is in discussion with some of its banking partners to transfer the business of Paytm Payments Bank.
“Many large banks have contacted us offering support and we are overwhelmed. We will have to change our Virtual Payment Address (VPA) as we partner with other banks. The decision to change partner banks will take place in a few weeks. We are in discussion and these are still to be completed, he said.
Bernstein assumes a fairly smooth transition in Paytm’s partnership from PPBL to other bank(s) including obtaining required licenses (eg TPAP for UPI) and therefore expects the long-term impact on traffic and payment volumes to be limited.
Referring to the migration of merchants from PPBL to another partner bank, the brokerage firm said the changes Paytm needs to implement for its merchants would be similar or less complicated than the changes required for the merchant to migrate to a competitor.
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Showing the confidence in the fintech giant, it further said that Paytm has the largest on-ground sales team (against peers) to implement this change. The company has a healthy cash balance (~INR 100-150 per share) – this provides the absolute floor and reasons to be confident that there is little reason for a distressed sale.
Paytm’s cash balance increased to ₹ 8,901 Cr in quarter ending December 2023, compared to ₹ 8,754 Cr in quarter ending September 2023.
Shares of the crisis-hit fintech giant rebounded on Tuesday, after shedding more than $2 billion in market capitalization in three sessions, following the RBI’s restrictions on its payments banking business. RBI has barred Paytm Payments bank from accepting new deposits and doing credit transactions after February 29.
Shares of Paytm One’s parent 97 Communications Ltd. rose as much as 8%, the most in six months, after the company denied reports that the company or its associate Paytm Payments Bank Ltd.
The free fall in Paytm shares finally seems to have found a bottom after analysts highlighted value in its core business despite the RBI’s scrutiny around its payments bank.
Also Read: FIIs, MFs and retail investors raised stakes in Paytm just before an epic crash
The global brokerage firm, Bernstein took a bold and contra call on the troubled new age stock to give an outperform rating with a target price of Rs 600.
Among the latest updates in the Paytm saga, Sharma held discussions with the RBI on February 5 to address regulatory concerns, Reuters reported citing two sources.