Paytm Share Price At Over Three-Year High After RBI Approves Online Payment Aggregator License

Paytm-parent One97 Communications Ltd. shares rose to the highest level since January 2022 on Wednesday after the Reserve Bank of India allowed subsidiary Paytm Payments Services Ltd. to operate as an online payment aggregator.

The RBI asked the company to undertake a system audit that also includes a cybersecurity audit and submit the report to the central bank within six months. If the company fails to submit the report, the in-principle authorisation granted shall lapse and the final authorisation will not be considered.

The central bank had previously declined Paytm's application, citing non-compliance with foreign direct investment norms. The RBI also instructed Paytm to meet the requirements before reapplying.

In August last year, PPSL received approval from the central government for downstream investment from the parent company, after which it resubmitted its PA application.

"While it awaits the approval of the application, PPSL continues to provide payment aggregation services to its existing online merchants," the Vijay Shekhar Sharma-led company said.

Research firm Citi said Paytm can now leverage its relative scale and product development capabilities to be more competitive in the payments segment.

Berstein said the RBI nod is the first constructive action after years of heightened regulatory scrutiny and raises the likelihood of approvals for other pending developments. Though the near-term earnings effect will be modest, over time, it should support higher payment margins, the brokerage said.

• Citi maintained a 'Buy' rating with a target price of Rs 1,215.

• Bernstein maintained an 'Outperform' rating with a target price of Rs 1,100.

Paytm shares surged nearly 6% to Rs 1,187 apiece during early trade. The benchmark Nifty 50 was up 0.3%. The relative strength index was 59. The total traded volume stood at six times the 30-day average.

Paytm's shares have risen 133% in the last 12 months and 15% year-to-date.

Out of 19 analysts tracking the company, 10 maintains a 'buy' rating, five recommend a 'hold' and four suggest 'sell', according to Bloomberg data. The average 12-month consensus price target of Rs 1,145.31 implies an upside of 2%.