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What does the NPCI approval mean for Paytm? How does life change for shareholders and how does life not change for Paytm users?
Rahul Jain: Basically, this is a logical thing to have happened because the previous letters and communications that came from the RBI circular was that there has to be continuity from a Paytm perspective given their large role as a third-party fintech player. Since their breakup has to have happened from a PPBL non-compliance perspective, there should have been more banks who would act as a PSP or payment service provider to ensure that the Paytm app remains relevant to the UPI ecosystem.
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Now, with four very large banks coming in as a PSP partner, there would be a smooth transition for all the users on the Paytm app. Apart from that, there is the announcement that Yes Bank would be a merchant acquirer as well, which also indicates that once this transition happens smoothly, they would also be allowed to do new user acquisitions, which had been stopped for some time. So, these are the two things that we could read out of the current letter communication, which has been shared.
Is this an indication that Paytm is doing the right things and soon the problems would be solved or is this like,, ye toh pata tha hone wala hai, (we knew this was going to happen)?
Rahul Jain: Yes, we knew this was going to happen because in various communications, including your interview with the RBI governor, there was a clear mention that the challenges were more on the Payment Bank side.
How Paytm would function if PPBL has so many restrictions, is something which has caused so much cause of worry and confusion and that is why we have seen so much stock impact. With some of these things normalising, we can say that the UPI part of the business is back to where it was and this could also lead from their perspective to focus their effort from retention or stability towards growth, which would mean that every other business which they stopped or consciously took their efforts away from would go back into the growth. This means a lot from that perspective. But yes, this was made obvious in the last letter as well.
So, what is the call on the stock? We are already quoting at that 350 levels, would you say now maybe one can look at buying if you did exit earlier?
Rahul Jain: Yes, of course. If we just look at the enterprise value of the company, this company would be slightly over $1.5 billion just on the EV side of it. Looking at even a very depleted version, assuming there is a 15-20% erosion even on the MTU side, the company might achieve eight to nine crore monthly users in two to three months from now once they achieve the stability and grow from there. I would say that in a way, they are back by three to four quarters in terms of whatever business they used to do. If we go by the revenue and profit matrix which the company was scoring three or four quarters back at worst, that is where it should be. So, going by that logic, there is substantial room for the stock to see an uptick. Of course, it is a function of how over a period of time they demonstrate that because definitely more and more investors would look at the number now rather than just a euphoric thought process and that is what we would also recommend. More data, more information in terms of how businesses are reviving and going back to track where it could be an incremental indicator for the stock to keep on systematically see upside. So that way we think it should happen as the next two quarters the stock may see a significant recovery from where it came from.
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