YES Securities, for the first time since they started covering One97 Communications Limited (OCL), the parent company of popular fintech firm Paytm, has upgraded their rating from 'sell' to 'buy'.
The brokerage firm's decision to upgrade demonstrates their belief in Paytm's strong strategic position and its capability to effectively adapt to the changing digital payments industry.
According to YES Securities, the fintech company's reliance on the wallet business for generating revenue has significantly decreased to only about one-sixth of its Payments revenue.
"The Wallet business, integral to Paytm Payments Bank (PPBL), is positioned to witness a decline in revenue contribution to near negligible levels. However, this adjustment is not anticipated to heavily impact OCL's financial trajectory, given the wallet's already reduced share in the company's revenue makeup--highlighting OCL's strategic foresight in diversifying its revenue sources," said the brokerage house.
Recently, the National Payments Corporation of India (NPCI) approved OCL to be a Third-Party Application Provider (TPAP) in the UPI system, operating under the multi-bank model.
This progress will guarantee the ongoing operation of Paytm's UPI business, effectively minimizing the possibility of any interruptions.
"Under the multi-bank model, OCL has tied up with AXSB, HDFCB, SBI, and YES, ensuring no disruption to the UPI business," YES Securities noted, underscoring the importance of this approval in maintaining Paytm's competitive edge in the digital payments space.
In response to the initial uncertainties, OCL has been actively communicating to minimize client losses and regain those who may have considered other options.
YES Securities has observed a manageable decrease in the value of UPI transactions, suggesting a potential for recovery and growth. This indicates that the approach adopted by Paytm is effective in maintaining its client base.
Despite facing temporary obstacles in the distribution of loans caused by regulatory factors, YES Securities expressed its expectation of a positive growth path, which will be facilitated by the addition of new partners. This positive outlook is further strengthened by Paytm's strong presence and success in the Wallet and Buy Now, Pay Later (BNPL) markets, highlighting the company's competitive nature and commitment to innovation.
