Paytm revenue may fall by 24%: Motilal Oswal says amid business transition following PPBL curbs
New Delhi: After Paytm Payments Bank Limited (PPBL) received regulatory warnings and was banned from operating, Motilal Oswal Financial Services said that Paytm’s FY25E revenue is expected to decline by 24 per cent. In an analysis report, Motilal Oswal said: “We remain watchful on the ongoing business transition and Paytm’s ability to recover lost business and resume growth trajectory over FY25- 26E. We thus estimate FY25E revenue to decline by 24 per cent, while contribution profit declines 30 per cent.”
It stated that the company’s contribution margin is expected to sustain at 51 per cent over FY25E vs 56 per cent in FY24. “We will revisit our rating post Q4 results and in the interim maintain our Neutral stance on the stock,” it said. Further, the analysis report also stated that the restrictions have put the company at risk of losing customers and merchants, disrupting its growth trajectory.
Paytm has recently received NPCI approval to function as a third-party app provider (TPAP), which will enable it to work like its peers, Google Pay and PhonePe. Paytm has tied up with Axis Bank, HDFC Bank, SBI, and YES Bank to ensure smooth business migration.
Paytm saw a significant decline in its Gross Merchandise Value (GMV) in February following RBI imposed restrictions on January 31, 2024. Motilal Oswal said this trend is likely to persist in March. It said that while some of this decline can be attributed to no additions in the new user base, there is also a looming risk of losing customers and merchants to competitors.
PPBL has around 1.8 million merchants onboard and the company’s ~40k field employees are currently assisting these merchants in switching their settlement accounts to alternative banks.
Motilal Oswal further said even as Paytm is anticipated to retain the majority of its merchant base after it received approvals from the NPCI, it is expected that around 15-20 per cent of merchants may churn.
On the customer front, the company has 60-70k customers with e-NACH mandates with PPBL, potentially resulting in a moderate impact on the consumer front.
Shares of One97 Communications dropped more than a per cent to Rs 406 on Friday and commanded a total market capitalization of more than Rs 25,000 crore. The stock has rebounded about 30 per cent from its 52-week lows at Rs 318.35.
Motilal Oswal has revised its target price to Rs 530 based on 15 times FY28E EV/Ebitda discounted to FY26. The brokerage firm will revisit its rating post fourth-quarter results and in the interim maintain its ‘neutral’ stance on the stock. The brokerage sees up to 30 per cent up side in the from its previous close.
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