The stock of One 97 Communications, the parent company of fintech giant Paytm, has seen a notable surge this week, hitting the upper circuit for the third time. On Thursday, May 30, the company’s shares climbed 5% from the previous close to reach INR 377.50 during intraday trading, marking the second consecutive day of hitting the upper circuit. This followed a similar upward trend on Wednesday when the shares reached an upper circuit of INR 359.55.
Market Movement and Speculation
The recent rally in Paytm’s stock price comes amidst speculation about the company’s potential revival, buoyed by positive market sentiment. Notably, the stock witnessed a significant jump of 4.9% to INR 356.55 on May 27, signaling growing investor confidence.
Clarification on Acquisition Rumors
The resurgence in Paytm’s stock price also coincides with the company’s dismissal of reports suggesting a stake acquisition by the Adani Group. In response to media speculation, Paytm clarified that there were no discussions or agreements regarding stake acquisition with the Adani Group. This clarification provided a boost to investor confidence and contributed to the positive momentum in the stock price.
Challenges and Recovery
Despite the recent uptick, Paytm’s stock prices remain significantly below their 52-week high of INR 998.50. The company has faced challenges, particularly in the regulatory landscape, leading to a decline of nearly half in its stock price on a year-to-date (YTD) basis.
Regulatory Setbacks
Paytm encountered regulatory hurdles earlier in the year when the Reserve Bank of India (RBI) imposed restrictions on its subsidiary, Paytm Payments Bank (PPBL). The restrictions, which included limitations on accepting deposits and processing UPI payments, significantly impacted the company’s operations and investor sentiment.
Financial Performance
Further exacerbating investor concerns were the company’s financial disclosures for the quarter ending March 31, 2023-24 (Q4 FY24). Paytm reported widening losses, which contributed to a decline in its stock price. However, brokerage firm YES Securities remains optimistic about the company’s prospects, citing signs of recovery in its payments business.
Market Outlook
Despite recent challenges, YES Securities has maintained a ‘buy’ rating for Paytm’s shares, with a price target of INR 450. The firm highlights positive indicators in Paytm’s merchant payments business and anticipates growth opportunities once certain regulatory issues are addressed.
In conclusion, while Paytm continues to navigate regulatory challenges and financial headwinds, the recent uptick in its stock performance suggests renewed investor confidence and optimism regarding the company’s long-term prospects.
