Shares of troubled fintech firm One 97 Communications on Monday rallied another 5% to the day’s high at Rs 427.95 on BSE after RBI asked NPCI to look into Paytm’s plea to become a third-party application provider for UPI usage. Global brokerage Morgan Stanley has also stood behind Vijay Shekhar Sharma by giving an equal-weight call on the stock.

RBI has allowed Paytm to transfer its IPO-based payments business from Paytm Payments Bank to 4-5 other banks and also directed the National Payments Corporation of India (NPCI), the operator of the UPI platform, to examine the fintech’s request to become a third-party application provider (TPAP) for the UPI channel. Getting NCPI’s approval will allow the Paytm app to continue offering UPI-based payment services.

Morgan Stanley, which had bought a 0.8% stake in Paytm for Rs 244 crore a couple of weeks ago amid the regulatory crisis, said if TPAP is approved by NPCI, it will enable continued UPI services for Paytm customers.

It has maintained an equal-weight call on Paytm with a target price of Rs 555.

How to trade Paytm?
Anand James, Chief Market Strategist at Geojit Financial Services, said there is a trading play at Paytm, while the long-term structures re-align and reshape. “Our upside objective is in the region of Rs 500-550, but we should be mindful of the chances of major collapse, should we not get above Rs 430. An aggressive stance would be to have Rs 390 as the downside marker,” he said.

The recent rally in Paytm shares came after RBI extended the ban by 15 days on Paytm Payments Bank’s key banking/wallet operations, except for nodal accounts and ED found no FEMA violation. Paytm’s new partnership with Axis Bank for nodal accounts is also expected to provide continuity of settlements for merchants and minimal disruption for its customers.

Jefferies, which has moved the stock to the “Not Rated” category, wants to stay away from making a bet on Paytm till the regulatory clouds recede.

“In case of no incremental regulatory clampdown, there could be multiple scenarios for the business depending on user/merchant retention. We see positive and negative risks arising from user/merchant retention, revenue traction, and cost controls. On the basis of merchant/user attrition to the tune of 10-30% and a hit to net revenues (adj. for payments interchange) of 20-45%, valuation could vary widely,” it said.

Bernstein, however, has maintained an outperform rating with a target price of Rs 600. The brokerage expects One 97 Communications to successfully execute the operational changes required to remove the dependency on PPBL with limited long-term impact on their overall business.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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