Paytm shares hit 5% upper circuit; Morgan Stanley maintains equal-weight, target suggests 57% upside
Paytm share price target: Morgan Stanley has maintained an equal-weight rating on Paytm with a target price of Rs 555. Its target implies an upside of 57.1 per cent in the stock. According to the global brokerage, the move is a positive development and in line with expectations.
Paytm share price, Paytm share price target, Paytm NPCI approval: Paytm parent One97 Communications’ shares surged on Friday, March 15, a day after the digital payments firm received a third-party application provider licence by the National Payments Corp of India, the country's payments authority, that would enable it to facilitate payments after Paytm Payments Bank ceases operations. The Paytm stock was locked in the five per cent upper circuit at Rs 370.9 and Rs 370.7 apiece in early deals on BSE and NSE, respectively.
The payments authority’s decision allows Paytm to participate in the country's popular Unified Payment Interface (UPI) as a third-party application provider (TPAP) under the multi-bank model. The move comes about a month after the RBI asked the NPCI to examine a request from Paytm to become a third-party application provider.
Paytm Payments Bank is scheduled to cease operations by the end of the day, following regulatory action due to non-compliance with certain norms.
The NPCI has said that four banks, namely Axis Bank, HDFC Bank, SBI, and YES Bank, will be acting as payment system providers (PSPs) to One97 Communications. It also said that YES Bank will be acting as a merchant acquiring bank for existing and new UPI merchants for OCL, and the “@Paytm” handle will be redirected to YES Bank.
The payments watchdog stated that the move will allow existing Paytm users and merchants to continue conducting UPI transactions and auto-pay mandates in a seamless and uninterrupted manner. Read more
Paytm share price target: What should investors do with Paytm shares? Here's what brokerages suggest:
Morgan Stanley on Paytm
Morgan Stanley has maintained an ‘equal-weight’ rating on Paytm with a target price of Rs 555. Its target implies an upside of 57.1 per cent in the stock. According to the global brokerage, the move is a positive development for Paytm and in line with expectations.
However, the brokerage awaits updates on:
- potential impact on Paytm businesses during February
- updated commercials for Paytm as Paytm Payment Bank's business moves to other banks
UBS on Paytm
UBS has retained a 'neutral' call on scrip with a target of Rs 510. According to the brokerage, the development clears the way for Paytm to operate like its competitors.
This will likely shift investor focus to operational performance over regulatory headwinds, it added.
UBS highlighted the extent of churn in the customer and merchant base, estimated at 15-20 per cent in a base case scenario.
"February 2024 total UPI (P2P+P2M) data is showing 14 per cent MoM decline and 2 ppts decline in share for Paytm which is in-line with 11 per cent quarter-on-quarter (QoQ) decline for 4Q built-in number," the brokerage added.
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