Paytm to rise above Rs 500? Motilal Oswal sees up to 30% upside in stock

Paytm shares traded above Rs 410 on the National Stock Exchange (NSE) intraday on March 22, rebounding around 32 percent from its 52-week low of Rs 318.35 hit in February, and maintaining its gradual recovery in this period.

Although the fintech grapples with the impact of RBI action on the Paytm Payments Bank (PPBL), Motilal Oswal sees a 30 percent upside in the stock.

Paytm recently received the National Payments Council of India (NPCI) approval to function as a third-party app, which will enable it to work like its peers Google Pay and PhonePe. The company has also tied up with Axis Bank, HDFC Bank, SBI, and Yes Bank to ensure smooth business migration.

Analysts at Motilal Oswal believe that the RBI’s restrictions on PPBL have put the company at risk of losing customers and merchants, disrupting its growth trajectory.

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Despite the company’s extensive reach, Paytm’s ability to mitigate the business impact will depend largely on the execution capabilities over the coming quarters. “We remain watchful on the ongoing business transition and Paytm’s ability to recover the lost business and resume growth trajectory over FY25-26,” Motilal Oawal said.

There has been a decline in Paytm’s UPI transaction volume in February, following the RBI action. Analysts anticipate a further decline in UPI transaction volume and value data in March 2024 as well. A decline in market share within the overall payments market is also anticipated.

Paytm’s payment processing margin is also estimated to decline as the mix of high-yielding wallet business drops sharply.

“The impact on financial business further suppress the revenue growth and profitability,” the brokerage said as it maintained a ‘neutral’ rating on the stock with a target price of Rs 530 per share.

Also Read | Can NPCI’s nod to Paytm’s UPI business ease its misery?

“We estimate FY25 revenue to decline by 24 percent, while contribution profit declines 30 percent. We estimate contribution margin to sustain at 51 percent over FY25,” MOSFL said, adding that it will revisit its rating after the Q4 results.

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