Paytm share price rallies 5% after RBI gives nod to operate as online payment aggregator. Should you buy?
Paytm share price has remained largely positive in the near-term. The stock has given multibagger returns in last one year by surging over 132 per cent. In the short-term, Paytm stock has gained 20 per cent in a month and nearly 55 per cent in six month.
The RBI, in its communication, clarified that the approval granted to PPSL is conditional on its compliance with the Guidelines on Regulation of Payment Aggregators and Payment Gateways and the related clarifications issued on March 31, 2021.
The authorisation applies solely to PA activities as defined in these guidelines, and transactions beyond this scope — such as merchant 'pay-outs' — cannot be processed through escrow accounts meant for PA operations.
Additionally, the central bank has instructed PPSL to carry out a thorough system audit, including a cybersecurity audit, to be conducted by a CERT-In empanelled auditor or a qualified professional holding CISA or DISA certification.
The audit must also cover adherence to the Master Direction on Cyber Resilience and Digital Payment Security Controls for non-bank Payment System Operators, as well as compliance with the RBI's circular on the Storage of Payment System Data.
The audit report must be sent to the RBI within six months from the date of the letter; otherwise, the in-principle authorisation will automatically expire.
Furthermore, PPSL has been instructed to obtain prior approval for any changes in its shareholding or ownership.
Brokerage firm JM Financial, while reiterating 'buy' tag with target price of ₹ 1,300, said that this could be a big sentimental trigger as the approval likely becomes a precursor to further regulatory clearances for Paytm.
' The approval marks a significant regulatory milestone for the company and also lifts the ban on on-boarding new merchants, which had been in place since Nov'22 when PPSL's earlier application was rejected. As highlighted in our earlier note on regulatory triggers, we expected this to have c.5% benefit to Paytm's FY27E EBITDA. We value Paytm at 40x Jun'27 Adj. EBITDA of INR 18.5bn to reach Jun'26 TP of INR 1,320, implying 17.9% upside at CMP. Moreover, there still remains the optionality of further regulatory triggers such as UPI monetisation and Paytm wallet that could each result in c.25-30% rise in our EBITDA estimates,' it said.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
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