Paytm - Regulator Completes Audit On Paytm Payment Bank; Directs Halt On Its Functions: Dolat Capital

Dolat Capital Report

Paytm Payment Bank (49% owned by Paytm) has been directed by Reserve Bank of India to discontinue most of its operating functions (deposit, PPI, wallet, Fastag, BBPOU, UPI) by end of February 29, 24. It has also asked to Paytm Payment Bank to not engage with Paytm’s other business units for Nodal accounts.

Taking these directives into account we believe Paytm would now be forced to immediately act on onboarding banks Partners to ensure smooth replacement of Paytm Payment Bank as its Payment Service Provider. 

Precise impact would be difficult to ascertain as it would be function of how effectively Paytm is able to seamlessly merge with other banking partners, and indirectly, this event would definitely impact consumer payments biz. growth and profitability blueprint (Management expects worst case impact between Rs. 3-5 billion for FY25-FY26).

While we remain upbeat on consistently increased engagement of consumer on its app and adoptions by its devices by merchants but we might attune our estimates further as we get more clarity on business impact from this post call on Feb, 01, 2024 at 3:30 pm.

Maintain Buy with target price of Rs 1,100 (implies ~3.6 times of FY26E enterprise value/sales).

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