Paytm Share Price: Fintech Giant's Stock Soars Over 12% Following NPCI Approval To Onboard Users; BUY?

The shares of fintech giant Paytm, owned by One 97 Communications, soared as much as 12% on Wednesday after receiving approval from the National Payments Corporation of India (NPCI) to onboard new users for its Unified Payments Interface (UPI) services. Paytm's share price hit Rs 769.90 apiece on the National Stock Exchange (NSE) following the news.

The latest development comes as a major relief for Paytm, which had been grappling with limitations imposed by the Reserve Bank of India (RBI) on Paytm Payments Bank Ltd (PPBL), its payments arm. Earlier this year, the RBI had restricted PPBL from onboarding new UPI users due to compliance concerns. This restriction significantly slowed down the company's UPI growth.

The NPCI approval follows a formal request by Vijay Shekhar Sharma, Founder and CEO of One 97 Communications, on August 1, 2024, seeking the removal of these onboarding restrictions. By adhering to NPCI's procedural guidelines, Paytm can now re-enter the UPI user acquisition race.

Analysts from major brokerage firms are optimistic about Paytm's future growth prospects, with the NPCI clearance serving as a pivotal step toward accelerating the company's UPI user base expansion.

In addition to the NPCI clearance, Paytm also announced its second-quarter (Q2) earnings for FY25, which revealed the company's first profitable quarter, thanks to a one-time gain. One 97 Communications reported a net profit of Rs 930 crore for the September quarter, largely due to an exceptional gain of Rs 1,345 crore from the sale of its entertainment ticketing business.

Despite the one-off profit boost, Paytm also demonstrated strong underlying business performance. The company's revenue grew by 11% quarter-on-quarter (QoQ), driven by a 5% increase in Gross Merchandise Value (GMV) and a 34% increase in revenues from its financial services segment. The fintech major's improved realization from devices also contributed to its growth.

Paytm further reported a significantly reduced EBITDA (before ESOPs) loss of Rs 180 crore, down from Rs 550 crore in the previous quarter, signalling continued success in its cost-optimization efforts. The company's financial performance in Q2, combined with the exceptional gain from its entertainment business sale, allowed Paytm to post its first-ever profit after tax (PAT) of Rs 930 crore.

By 1:25 pm on Wednesday, Paytm shares were trading at Rs 759.60, marking a nearly 11% gain on the day. However, the stock has delivered negative returns of over 25% in the past year.

Market experts believe that the dual positive developments - NPCI's approval to onboard new UPI users and the company's strong Q2 results - could act as catalysts for the stock's recovery. However, long-term growth will depend on Paytm's ability to sustain its profitability and effectively compete in the crowded UPI payments space.