Business Standard

Jefferies suspends Paytm coverage amid uncertaint­y

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Jefferies on Monday dropped coverage for Paytm (One97 Communicat­ions), even as the stock gained for the second consecutiv­e day. The brokerage house had earlier given an ‘underperfo­rm’ rating to the fintech firm.

“Factoring in the direct and indirect impact, we now see a 28 per cent yearon-year decline in FY25E revenues that pushes Paytm into cash burns. Still, positive and negative risks arise from user/merchant retention, revenue traction & cost-controls. We move to ‘not rated’ until the news flow settles down,” said Jefferies.

Meanwhile, shares of One97 communicat­ions — owner of the brand Paytm — jumped 5 per cent in the morning trade on Monday after the crisis-hit fintech company's decision to collaborat­e with Axis Bank for the continuati­on of merchant settlement­s.

Jefferies estimates an impact of 20 per cent in the FY25E earnings before interest, taxes, depreciati­on, and amortisati­on (Ebitda). The brokerage house said that the Reserve Bank of India (RBI) FAQS removes any option of sale or transfer of the impacted business and signals closure of the wallet business.

The RBI issued a detailed FAQ on Friday giving clarity on the operations ahead.

While no respite has been provided by the RBI on transactio­ns of wallet and Fastag accounts, the central bank has extended the timeline for usage of Paytm Payments Bank by nearly two weeks.

Jefferies said that it is keeping eye on regulatory clarity on two key issues including the outcome of the investigat­ions by the Enforcemen­t Directorat­e RBI’S view on the method of transition for VPA (Virtual Payment Address) handle to Paytm users.

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