Brokerage Reports: Paytm’s Future Post RBI’s Paytm Payment Bank Direction

Bernstein on Paytm

RBI’s recent order essentially halts operations for Paytm Payments Bank (PPBL).

This development is a clear negative, compounding existing regulatory concerns for Paytm.

Immediate impact on Paytm’s UPI payment business is not anticipated.

However, there’s a slight risk to payment margins, especially for higher-margin products tied to the Payments bank like Wallets & FasTag.

The loan distribution business remains unaffected and carries no risk.

The regulatory uncertainties around Paytm’s model are emphasized, presenting a significant risk to the business’s stability.

From a regulator’s perspective, Paytm’s model is yet to evolve into a secure format.

Jefferies on Paytm

Jefferies maintains a Buy rating, setting a target price at ₹1,050.

RBI’s robust statement imposes restrictions on Paytm’s payment bank due to non-compliance.

A potential impact on the lending business (constituting 20% of revenues) may arise if lending partners limit business due to operational or governance concerns.

There might be a need to wind down Wallet GMV, accounting for 5% of the total.

Merchants utilizing Paytm Bank (6% of devices) could face repercussions.

Fastag GMV is expected to be significantly affected.

The situation poses a substantial risk to earnings and valuations, and further details from management are awaited.

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