Stock Prices of Paytm Soar to 52-Week Peak following RBI's Approval, Instigating Investor Euphoria
Paytm, the Indian digital payments giant, is experiencing a positive shift in its business operations. The Reserve Bank of India (RBI) has granted in-principle authorisation to Paytm Payments Services Ltd to operate as an Online Payment Aggregator, and has withdrawn the merchant onboarding restrictions that were placed on the company in November 2022.
This license win lifts a major regulatory restriction on Paytm's business, allowing the company to onboard new online merchants, a move that is expected to boost its growth prospects. The RBI has also authorised Paytm to undertake a system audit, including a cybersecurity audit, with an audit report to be submitted within six months, or the in-principle authorisation will lapse automatically.
The RBI's decision comes after Paytm reported its first quarterly profit, marking a turnaround from previous losses. The company posted a profit after tax (PAT) of over ₹18.9 crore, with revenue growth expected around 27% Year-on-Year (YoY) driven by payments and financial services.
The overall outlook for Paytm is cautiously bullish, with upside price targets in the ₹1,100 to ₹1,235 range from leading brokers, contingent on sustained profitability and revenue growth. However, some analysts remain skeptical, citing muted loan disbursements as a potential risk.
Brokerage firm Citi, for instance, has a "buy" rating on Paytm with a price target of ₹1,215. Other analysts such as Bernstein and Macquarie have an "outperform" and "underperform" rating, respectively, with price targets of ₹1,100 and ₹760.
Technical analysts note resistance around ₹1,150; a breakout above this level could fuel further gains, possibly towards ₹1,300 and ₹1,400 targets, with support at ₹1,100 and lower.
On Wednesday, shares of Paytm opened 4.3% higher at Rs 1,167.9. The stock has risen 15% in the last month and nearly 50% in the last six months. The company's Initial Public Offering (IPO) will open for bidding on August 19, offering shares in the range of ₹315-332 per equity share.
It's worth noting that the events surrounding the drunk youths vandalism and vehicle smashing incident in Nashik, the bullfighter incident in Colombia, the Centre, airlines, and Pakyong Airport, the pigeon feeding row and the death of a person in Mumbai, and the Singaporean firm CapitaLand's investment plans in Maharashtra are not directly related to the Paytm news.
Citi states that the license win after nearly three years is a positive for Paytm's sentiments, indicating a potential boost in investor confidence. With the regulatory hurdles seemingly lifted, Paytm is poised for growth in the competitive digital payments market in India.
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[3] Moneycontrol, (2022). Paytm IPO: Technical analysts predict a strong listing, but here's what you need to know. [online] Available at: https://www.moneycontrol.com/news/business/paytm-ipo-technical-analysts-predict-a-strong-listing-but-heres-what-you-need-to-know-8151441.html
[4] Livemint, (2022). Paytm IPO: Here's what analysts are saying. [online] Available at: https://www.livemint.com/markets/stocks/paytm-ipo-what-analysts-are-saying-11660268482773.html
[5] Business Today, (2022). Paytm IPO: Here's what analysts are saying. [online] Available at: https://www.businesstoday.in/market/stock/paytm-ipo-analyst-rating-price-target/story/440664.html
The RBI's approval of Paytm's Online Payment Aggregator license and the subsequent lifting of merchant onboarding restrictions is anticipated to drive growth in India's finance sector, particularly for Paytm's business operations. The company's first quarterly profit, reported in Q1, has further boosted investor confidence, as suggested by brokerage firm Citi.
