Paytm share price

Paytm Stock Surges 12% as NPCI Approval Sparks User Base Reacceleration and Business Turnaround

In a major regulatory breakthrough, Paytm has received approval from the National Payments Corporation of India (NPCI) to onboard new users for its Unified Payments Interface (UPI) services. This marks a pivotal moment for the fintech giant, reaccelerating its user base growth after months of stagnation and signaling a more relaxed regulatory environment.

Shares of Paytm soared nearly 12% on Wednesday following the announcement, hitting ₹769.50 apiece on the BSE—an 11.95% intraday jump. This rally not only reflects investor optimism but also hints at Paytm’s recovery strategy in the UPI space.

NPCI Approval: A Game Changer for Paytm

One 97 Communications, Paytm’s parent company, disclosed that the NPCI’s green light will enable the fintech firm to add new UPI users once again, in compliance with NPCI guidelines. Earlier this year, the Reserve Bank of India (RBI) had restricted Paytm Payments Bank Ltd (PPBL) from onboarding new UPI users on the Paytm app, which had stifled the company’s growth.

However, this recent approval came after Vijay Shekhar Sharma, Founder and CEO of Paytm, made a formal request on August 1, urging NPCI to lift the restrictions. This marks a significant victory for Sharma and Paytm, potentially reigniting their UPI business and growth momentum.

According to analysts, the approval is a turning point for Paytm. “Paytm has finally received NPCI approval to onboard new UPI users, which will pave the way for re-accelerating its dwindling user base and further signals an easing of regulatory stance,” said Anand Dama, Senior Research Analyst at Emkay Global Financial Services.

Paytm’s Stellar Q2 FY25 Results

The regulatory win came alongside Paytm’s strong Q2 FY25 earnings report, which saw the fintech major return to profitability. Paytm’s parent, One 97 Communications, posted a net profit of ₹930 crore in the September quarter, buoyed by a one-time exceptional gain of ₹1,345 crore from the sale of its entertainment ticketing business.

Despite this one-off gain, the company achieved impressive operational results as well, with an 11% quarter-on-quarter (QoQ) revenue growth. This was driven by a 5% QoQ increase in Gross Merchandise Value (GMV), better device realizations, and a significant 34% QoQ surge in revenues from financial services.

Paytm’s efforts toward cost optimization are paying off too, with the company reporting a reduced EBITDA (before ESOP) loss of ₹1.8 billion, down from a loss of ₹5.5 billion in the first quarter. This reduction, combined with lower ESOP costs and the one-off gain from the ticketing business sale, propelled Paytm to its first-ever PAT (Profit After Tax) of ₹9.3 billion.

Path to Profitability: What’s Next for Paytm?

With the latest earnings report, analysts believe Paytm is on an accelerated path to profitability, which could occur as early as FY26 or FY27. “Paytm’s cost optimization measures and gradual business turnaround should put it on an early path to profitability (EBITDA/PAT positive by FY26E/FY27E),” noted Dama.

The stock’s re-rating, however, will depend on several factors. According to Emkay Global, Paytm’s further upward trajectory will rely on how quickly it can regain lost Monthly Transacting Users (MTU), see a strong rebound in its lending business, and avoid any additional regulatory hurdles. Paytm share price, In light of the recent developments, Emkay Global has retained an ‘Add’ rating on Paytm, with a DCF-based share price target of ₹750 apiece.

At 12:45 pm on Wednesday, Paytm shares were trading 10.82% higher at ₹761.65 on the BSE, further underlining the positive market sentiment.

Conclusion

Paytm’s NPCI approval couldn’t have come at a better time. With strong Q2 results showing a clear path toward profitability and regulatory restrictions easing, the fintech giant is once again poised for growth. Paytm share price, Investors are optimistic about Paytm’s future, especially with its focus on cost optimization and its potential to recoup lost users in the UPI space. As the company continues to navigate the complexities of the fintech industry, its stock remains one to watch.

FAQs:

1.What caused Paytm’s stock to rise 12%?

A. Paytm’s stock surged after receiving NPCI approval to onboard new UPI users, sparking investor optimism.

2.How much did Paytm shares increase on BSE?

A. Paytm shares jumped by 11.95%, reaching ₹769.50 on the BSE.

3.What regulatory restrictions were lifted for Paytm?

A. NPCI approved Paytm to onboard new UPI users, lifting previous restrictions imposed by RBI on Paytm Payments Bank.

4.How did Paytm perform in Q2 FY25?

A. Paytm reported a net profit of ₹930 crore in Q2 FY25, boosted by a one-time gain from selling its entertainment ticketing business.

5.What was Paytm’s revenue growth in Q2 FY25?

A. Paytm achieved 11% quarter-on-quarter revenue growth, supported by a 5% GMV increase and 34% growth in financial services.

6.What is the expected profitability timeline for Paytm?

A. Analysts project that Paytm could turn EBITDA/PAT positive by FY26 or FY27, thanks to cost optimization efforts.

7.What role did cost optimization play in Paytm’s results?

A. Paytm’s reduced operating expenses and lower ESOP costs contributed to its first-ever PAT of ₹9.3 billion.

8.How are analysts rating Paytm’s stock?

A. Emkay Global has retained an ‘Add’ rating for Paytm, with a price target of ₹750 per share.

9.What challenges remain for Paytm?

A. Paytm faces challenges in recouping its user base, regaining lending momentum, and avoiding further regulatory disruptions.

10.What is the future outlook for Paytm’s stock?

A. The future outlook is positive, but Paytm’s further growth will depend on its ability to scale its user base and lending business without new regulatory issues.