NEW DELHI: In an endorsement of One97 Communications Limited (OCL), which operates popular fintech firm Paytm, YES Securities has upgraded its rating from 'sell' to 'buy' for the first time since the commencement of its coverage.
This upgrade reflects the brokerage firm's confidence in Paytm's strategic positioning and its ability to navigate the evolving digital payments landscape successfully.
According to YES Securities, the fintech company's dependence on the wallet business for revenue had already declined materially to only about one-sixth of Payments revenue.
"The Wallet business, integral to Paytm Payments Bank (PPBL), is positioned to witness a decline in revenue contribution to near negligible levels. However, this adjustment is not anticipated to heavily impact OCL's financial trajectory, given the wallet's already reduced share in the company's revenue makeup--highlighting OCL's strategic foresight in diversifying its revenue sources," said the brokerage house.
As recently as last week, the National Payments Corporation of India (NPCI) has granted OCL the approval to participate in UPI as a Third-Party Application Provider (TPAP) within the multi-bank model.
This development will ensure the continuity of Paytm's UPI business, effectively mitigating potential disruptions.
"Under the multi-bank model, OCL has tied up with AXSB, HDFCB, SBI, and YES, ensuring no disruption to the UPI business," YES Securities noted, underscoring the importance of this approval in maintaining Paytm's competitive edge in the digital payments space.
In light of initial uncertainties, OCL's proactive communication efforts have been geared towards minimizing client loss and recapturing those who may have explored alternatives.
This approach is deemed effective in sustaining Paytm's client base, with YES Securities observing a manageable decline in UPI transaction value, indicating a potential for recovery and growth.
Despite temporary setbacks in loan distribution due to regulatory considerations, YES Securities said it anticipates a supportive growth trajectory facilitated by new partner additions. This optimistic outlook is further buoyed by Paytm's historical dominance in the Wallet and Buy Now, Pay Later (BNPL) markets, showcasing the company's inherent competitive DNA and innovation-driven ethos.