Paytm shares in focus today: PPSL gets RBI PA licence, merchant curbs lifted

Shares of One 97 Communications Ltd (Paytm) may react positively on Wednesday morning after Paytm Payments Services Limited (PPSL), a wholly-owned subsidiary, received the Reserve Bank of India (RBI) nod for a Payment Aggregator (PA) licence. 
In a release, Paytm told stock exchanges that the central bank has granted ‘in-principle’ authorisation to PPSL to operate as an Online Payment Aggregator under the Payment and Settlement Systems Act, 2007. 

In its letter, the RBI said that merchant onboarding restrictions placed on the PPSL since November 2022 stand withdrawn from the date of the letter. The authorisation only covers online PA operations as defined in PA-PG Guidelines. The transactions, which do not fall under the ambit of the said guidelines, including 'pay-out transactions undertaken on behalf of merchants, should not be routed through escrow account designated for PA operations, RBI said.

Besides, the RBI said: The applicant is advised to undertake a System Audit, including Cyber Security audit, to be conducted by a CERT-In empanelled auditor or a Certified Information Systems Auditor (CISA) registered with Information System Audit and Control Association (ISACA) or by a holder of a Diploma in Information System Audit (DISA) qualification of the Institute of Chartered Accountants of India (ICAI)."

It said the scope and coverage of the audit to be undertaken is contained in the letter dated January 10, 2020. The scope would also cover the Master Direction on Cyber Resilience and Digital Payment Security Controls for non-bank Payment System Operators dated July 30, 2024, as applicable and compliance with the RBI circular 'Storage of Payment System Data' dated April 6, 2018.

Paytm recently reported a steady June quarter with in-line revenue. A tighter cost control led to a healthy profit for the company in Q1. The disbursement commentary was steady, while MTU witnessed a steady-state recovery. GMV recovery was better than expected, MOFSL said.

"Paytm is making steady progress toward profitability, underpinned by its strategic shift toward financial services and disciplined cost management," MOFSL noted.

Contribution margin for Paytm expanded to 60.1 per cent in Q1, thanks to cost control. 

"Disbursement growth is expected to remain healthy going ahead given improving tailwinds in unsecured lending. We estimate a 35% CAGR in disbursements over FY25-28, with healthy take rates expected. Paytm's Rs 16,100 crore cash cushion offers comfort; consistent delivery is critical for sustainable shareholder returns," MOFSL said.