Paytm upper circuit: Stock gains 5% as Yes Securities upgrades stock to ‘Buy’, raises target price

livemint.com:

₹505 per share from ₹350 earlier. Paytm shares hit the upper circuit of 5% for the second straight session today. The brokerage house notes five key reasons behind the rating upgrade, including Paytm’s declining dependence on the wallet business for revenue, the NPCI nod to participate in UPI as a Third-Party Application Provider (TPAP) in the multi-bank model, well-contained client loss due to reputational damage, rising partner addition and the competitive DNA of the company.

Firstly, Yes Securities noted that the dependence of One 97 Communications, the parent company of the fintech giant Paytm, on the Wallet business for revenue had already declined materially to only about one-sixth of Payments revenue. Wallet business is housed within Paytm Payments Bank (PPBL), which after the RBI ban, will see its revenue decline to near negligible. However, the brokerage firm noted that, out of the rough run rate of ₹6,000 crore worth of revenue for the Payments business, the contribution of the Wallet had declined to about ₹1,000 crore.

Hence, the reset, while damaging for One 97 Communications (OCL), will not have a particularly outsized impact. Also Read: Paytm gets a third-party license from NPCI. What does this mean for you? Recently, the National Payments Corporation of India (NPCI) had approved OCL to participate in UPI as a TPAP in the multibank model.

“It needs to be understood and appreciated that, had this approval not come, OCL’s UPI business would have, also, declined to nil. This is because OCL used to conduct its UPI transactions with PPBL as its Payment Service Provider (PSP) and with a unique UPI handle carrying “@paytm". Under the multi-bank model, OCL has tied up with Axis Bank, HDFC Bank, SBI and YES Bank and