Paytm Shares Recover Amid Reversal of Paytm Payments Bank Decision by RBI

One97 Communications Shares Recover After Initial Decline Following Regulatory Action

Shares of One97 Communications pared most of their losses on Monday after an initial decline following regulatory action against its associate entity, Paytm Payments Bank Limited. The stock had fallen sharply in early trade after the Reserve Bank of India (RBI) on Friday cancelled the banking licence of Paytm Payments Bank Limited for non-compliance with norms, stating that its affairs were conducted in a manner detrimental to depositors.

On the National Stock Exchange (NSE), shares of the company dropped 8.38 percent to Rs 1,051.10 in early trade. However, the stock later recovered, trimming most of the losses to trade at Rs 1,134.15, down around 1 percent at 3:20 pm.

Market experts attributed the recovery to buying at lower levels, with investors viewing the development as having limited impact on the company's core operations. Research Analysts at various brokerages, including Bonanza and Jefferies, noted that the cancellation of the payments bank licence is "fundamentally neutral" for One97 Communications, as the investment had already been fully impaired and operational separation was completed earlier.

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Global brokerage Jefferies reiterated its "Buy" rating on the stock, maintaining a price target of Rs 1,350, implying an upside of 18 percent. Jefferies said the company had already undertaken structural changes over the past two years following regulatory restrictions on PPBL, including shutting down the wallet business linked to the bank, migrating UPI handles to partner banks, terminating inter-company agreements, and writing off its investment.

Another brokerage, Bernstein, maintained an "Outperform" rating with a price target of Rs 1,500, implying about 31 percent upside. It said the regulatory action is limited to the payments bank and does not affect the company's core business.

In an exchange filing, One97 Communications said it has no exposure to PPBL, having fully impaired its investment as of March 31, 2024. The RBI said the licence cancellation is effective from the close of business hours on Friday, adding that PPBL has adequate liquidity to repay its deposit liabilities upon winding up.

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Market experts expect the company to deliver revenue compound annual growth rate (CAGR) of around 22 percent between FY26 and FY28, driven by financial services distribution and steady growth in payments. Profit after tax is projected to reach nearly Rs 1,700 crore by FY28, with margins improving over the period.