Paytm share price up 5% after Yes Securities upgrades stock to ‘Buy’: What next?

Paytm share price: Paytm share price locked at 5% upper circuit in early trade today (March 18) after the stock received a ratings upgrade from Yes Securities which upgraded Paytm to ‘Buy’ from ‘Neutral’.

The firm also raised target price to ₹505 per share from ₹350 earlier. Shares of One 97 Communications- Paytm’s parent company- settled at ₹370.90 on Friday after hitting an upper circuit of 5 per cent. The stock has corrected about 63 per cent from its 52-week high at ₹998 as it has seen a sharp sell-off after Reserve Bank of India (RBI) barred some operations of Paytm Payments Bank (PPBL) over various compliance issues.

What YES Securities on Paytm share price?

YES Securities said that Paytm’s dependence on Wallet business has already declined materially to only about one-sixth of payments revenue as the business declined to ₹1,000 crore out of ₹6,000 crore revenue

. This comes after NPCI gave its nod to Paytm to participate in UPI as a third-party application provider (TPAP) in the multi-bank model. This move will keep Paytm’s UPI business intact, YES Securities said adding that client loss due to reputational damage and on-ground confusion will be well contained.

“Loan distribution has undergone a reset but partner addition will be supportive. However, loan distribution will resume in the short-term but BNPL will remain suspended till comfort is regained from a regulatory standpoint.

Structurally, growth will be driven by lending partner addition alongside same partner growth,” it said.

Past successes underline the competitive DNA of Paytm as an organisation, it said, explaining, “Having received feedback from the regulator and undergone a de-risking process

, we now believe that a less volatile future lies ahead for Paytm. We value OCL at 2.7 times FY25E P/S for an FY28-31E EPS CAGR of 78 per cent. We have not assumed any rehabilitation of OCL’s Wallet business in our assumptions.

We have assumed a relatively constrained outlook for the loan distribution business. The market is currently pricing in an even more acute scenario.”

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