Why Paytm shares reached the 5% upper circuit today is explained

After receiving permission from the National Payments Corporation of India (NPCI) to function as a third-party application provider for Unified Payments Interface (UPI) services, Paytm’s shares increased by 5% and touched the upper circuit limit on Friday, March 15.

This came about when the Reserve Bank of India (RBI) ordered Paytm Payments Bank to comply with regulatory regulations, which resulted in the bank’s activities being terminated on March 15 for noncompliance.

With the permission of NPCI, One97 Communications, the parent company of Paytm, is now able to collaborate with four major banks—Axis Bank, HDFC Bank, State Bank of India, and Yes Bank—to provide digital payment services in a multi-bank model.

The “@Paytm” handle will be reassigned to Yes Bank under this new arrangement, which will result in continued service continuity for both current users and merchants.

In an exchange filing, the business encouraged merchants and users to switch to the new payment service provider banks as soon as necessary, guaranteeing a smooth transition.

Paytm’s shares had their biggest rise in two weeks at the beginning of the trading day, rising 5% to 370.70 rupees. Even with this encouraging trend, the stock has lost value since late January, when Paytm Payments Bank was forced to stop accepting new deposits due to regulatory actions.

Experts from trading houses like UBS and Jefferies commented on the consequences of Paytm’s license for third-party app providers. UBS said that Paytm will now function similarly to rivals like Google Pay and PhonePe, but Jefferies pointed out that Paytm could need to use its cash reserves—which are estimated to be worth 85 billion rupees ($1.02 billion)—in order to keep merchants and consumers.

The NPCI’s decision is seen favorably by international brokerage companies as it removes regulatory obstacles to Paytm’s seamless transition. Regarding merchant and customer retention as well as the normalization of its lending operations, there are still unanswered questions.

Despite these difficulties, Jefferies is still upbeat about Paytm’s future, forecasting a little rise in the value of payments and app use in addition to the likelihood that the business would use its cash reserves to retain users.

“The firm is transitioning to a payment-only business model. According to Jefferies, Paytm is probably going to use less than $1 billion of its cash reserve to retain merchants and customers.