Paytm Set For Recovery After Regulatory Approval, Say Global Brokerages

The recent government approval for One 97 Communications to make downstream investments in its payments arm, Paytm Payments Services Limited (PPSL), has reignited optimism among global brokerage firms.

This approval is expected to bolster Paytm’s recovery and growth as it embarks on its next operational phase. Leading global brokerages such as Citi, UBS, and Ventura Securities have highlighted in their research reports that the approval eliminates regulatory uncertainties and positions the company for a robust recovery and expansion.

On August 27, Paytm announced through an exchange filing that it had received the green light from the Ministry of Finance for its downstream investment into PPSL.

The company stated, “With this approval in place, PPSL will proceed to resubmit its PA application. In the meantime, PPSL will continue to provide online payment aggregation services to existing partners,” adding that Paytm remains committed to maintaining a compliance-first approach and adhering to the highest regulatory standards.

This development is seen as a step towards resuming new online merchant acquisitions, which had been paused since November 2022 due to regulatory constraints.

Citi Research emphasized that the approval resolves ownership-related issues, although the company must still obtain a payment aggregator license from the RBI before it can restart acquiring new online merchants.

UBS echoed this sentiment, noting that the regulatory approval clears a significant hurdle for Paytm, boosting market confidence as the company moves closer to obtaining the necessary license.

Morgan Stanley added, “We believe it reduces regulatory overhang incrementally. We will track the RBI’s response to the next steps.” They also pointed to Paytm’s strong business model and advanced technology as key advantages.

Ventura Securities highlighted Paytm’s expansive merchant base, emphasizing its ability to generate recurring revenue streams.

“Despite the RBI stricture on associate Paytm Payment Bank (PPBL), we believe that Paytm’s business model is robust and technology is gold standard. Paytm’s pan-India merchant base of 40.7 million and 78 million monthly transacting users (MTUs) presents a strong ecosystem for recurring revenue streams,” Ventura said.

The brokerage also pointed to the growing adoption of Unified Payments Interface (UPI) and the increasing importance of Paytm’s soundbox and point-of-sale (POS) systems, which have become essential tools for digital payments.

“With UPI emerging as the favored digital payments medium and Paytm’s originated soundbox (+POS) becoming an essential toolkit for payments, Paytm is well-positioned to benefit from the tailwind associated with this,” Ventura added.

The consensus among these firms is clear: Paytm is on the path to strong recovery, supported by a favorable regulatory environment and a solid business foundation.

(With ANI Inputs)

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