Paytm, the digital payment giant, witnessed a surge of 5 per cent in its shares, marking the second consecutive session of hitting the upper circuit on February 19. This remarkable upswing followed the announcement of a strategic partnership with Axis Bank to facilitate the settlement of merchant payments.
At 9:16 am, the stock was seen trading at Rs 358.35 on the National Stock Exchange (NSE), reflecting investor optimism in response to this development.
In a significant move, One97 Communications, the parent company of Paytm, has transitioned its nodal account operations to Axis Bank, utilising an escrow account established with the latter.
This shift is poised to ensure seamless operations for all of Paytm's merchant partners, encompassing services such as Paytm QR, Soundbox, and card machines, as articulated by the company in a released statement.
The timing of this collaboration gains added significance as it aligns with the Reserve Bank of India's (RBI) decision to extend the deadline for halting operations and facilitating the migration of assets for Paytm Payments Bank account holders.
This extension, now slated until March 15, provides customers and merchants associated with Paytm Payments Bank with additional time to explore alternative banking options.
The RBI's proactive approach also includes the dissemination of a list of frequently asked questions (FAQs) tailored specifically for Paytm Payments Bank account holders. These FAQs offer comprehensive insights into various aspects, ranging from clarifications on the remaining balance to the continuity of services like UPI payments and FASTag vehicle integration.
Despite these developments, Citi maintains a cautious stance on Paytm's stock, issuing a "sell" call with a target price of Rs 500 per share.
The brokerage underscores that while the RBI's FAQs address several pertinent concerns, they fall short of directly elucidating the implications of bank partnerships for Paytm.
Moreover, Jefferies India has opted to suspend its rating on Paytm until there is a semblance of stability in the news cycle surrounding the fintech behemoth.
Transitioning from an "underperform" rating to "not rated," Jefferies anticipates a notable year-on-year decline of 28 per cent in FY25E revenues, a factor that could exacerbate Paytm's cash burn scenario.
Against the backdrop of these developments, it's noteworthy that Paytm shares have witnessed significant volatility, exemplified by a 55 per cent decline over the past month. Despite the prevailing challenges, the partnership with Axis Bank and the RBI's deadline extension signal a concerted effort by Paytm to navigate through turbulent waters and fortify its position in the digital payments landscape.
