paytm shares: Paytm shares rally 5% on getting govt nod for downstream investment in payments arm

After this approval, the payment services business, Paytm Payments Services Limited (PPSL), will resubmit the application for its payment aggregator license.

“We would like to inform you that PPSL has received approval from the Government of India, Ministry of Finance, Department of Financial Services, vide its letter dated August 27, 2024, for downstream investment from the Company into PPSL. With this approval in place, PPSL will proceed to resubmit its PA application. In the meantime, PPSL will continue to provide online payment aggregation services to existing partners,” said the company in a filing to the exchanges.

One 97 Communications, which operates Paytm, has been under the scrutiny of India’s banking regulator and financial crime-fighting agency after the central bank ordered it to wind down its payments bank in January.

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With the latest approval, the company will resubmit an application with the ministry to regain a license for its payments services business, Paytm said.

Here is how brokerages view the update:

UBS: Neutral| Target price: Rs 490

UBS has maintained a neutral call on Paytm with a target price of Rs 490.

Paytm gets the go-ahead from the government for investment in PPSL and the company is likely to re-apply for the payment aggregator license. This clears one of the key regulatory

overhangs for the company and is sentiment-positive. The government’s nod was necessary to get a PA license as per RBI. Post the grant of license by RBI, Paytm will be able to add new online merchants that were under embargo.

Jefferies: Hold| Target price: Rs 420

Jefferies maintained a hold rating on Paytm with a target price of Rs 420.

Paytm has received approval from the Ministry of Finance for downstream investment in its payment gateway business. It will now resubmit its PA license application to RBI. If granted, it will be able to onboard new online merchants, which have been frozen since November 2022. The immediate business impact could be marginal, and Jefferies sees diminishing regulatory concerns as a positive. Post RBI approval, the key pending regulatory issue is NPCI approval for new user onboarding.

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