ICICI Securities has given Buy recommendation for One 97 Communications (Paytm) recommended buy rating on the stock with a target price of Rs 1285 in its resear with a target price of Rs. 1285 in its research report issued on Mar 13, 2022

ICICI Securities research report on One 97 Communications (Paytm)

RBI has directed Paytm Payments Bank (PPBL), an associate of One 97 Communications (OCL or Paytm), to temporarily halt onboarding of new customers, via a letter dated 11th Mar’22. The embargo will have an adverse impact on signing up users for new PPBL wallets or savings / current accounts, until further notice. Also, observing certain material supervisory concerns at PPBL, RBI’s directive will also remain an overhang till concerns are appropriately addressed. PPBL is taking immediate steps, including appointment of a reputed external auditor, to conduct a comprehensive audit of its IT systems and remains committed to working with the regulator to address their concerns. However, in this context, we recall recent instances of embargo on a leading bank, which stayed in place for 8-15 months. We were estimating Paytm’s consumer base to grow by 10% in FY23E and monthly transacting users to increase at >25% run-rate. Company will have to increase its efforts to enhance engagement with the existing user base to offset the adverse impact of embargo on new users.

Outlook

Now, expecting moderation in onboarding of new users and the adverse impact on incremental payment revenue (as wallets are key monetisable payment instrument), we revise our target price to Rs1,285 (earlier Rs1,352). Also, it may defer PPBL’s plan to apply for conversion into small finance bank (though eligible to apply from May’22). Maintain ‘BUY’.

More Info

At 14:05 hrs One 97 Communications Paytm was quoting at Rs 696.95, down Rs 77.85, or 10.05 percent.

It has touched an intraday high of Rs 719.20 and an intraday low of Rs 672.10.

It was trading with volumes of 488,736 shares, compared to its thirty day average of 182,779 shares, an increase of 167.39 percent.

In the previous trading session, the share closed down 0.14 percent or Rs 1.05 at Rs 774.80.

The share touched its 52-week high Rs 2,150.00 and 52-week low Rs 728.50 on 16 October, 2021 and 08 March, 2022, respectively.

Currently, it is trading 67.58 percent below its 52-week high and 4.33 percent above its 52-week low.

Market capitalisation stands at Rs 45,198.89 crore.

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