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Motilal Oswal says Paytm revenue to fall by 24%. Google Pay, PhonePe to benefit?
Motilal Oswal said, “We remain watchful on the ongoing business transition and Paytm’s ability to recover lost business and resume growth trajectory."
Following Reserve Bank of India's (RBI) decision to impose business restrictions on Paytm Payments Bank Limited (PPBL) over regulatory concerns, Motilal Oswal Financial Services said that Paytm’s FY25 revenue ,could decline by 24 per cent. In an analysis report, Motilal Oswal said, “We remain watchful on the ongoing business transition and Paytm’s ability to recover lost business and resume growth trajectory over FY25- 26E. We thus estimate FY25E revenue to decline by 24 per cent, while contribution profit declines 30 per cent."
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It also said that the company’s contribution margin is expected to sustain at 51 per cent, adding, “We will revisit our rating post Q4 results and in the interim maintain our Neutral stance on the stock."
The restrictions could result in the company losing customers and merchants, it warned, noting that even Paytm could lose 15-20 per cent of merchants but the impact on customers may be moderate.
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This comes as, earlier this month, the National Payments Corporation of India (NPCI) gave its nod to Paytm’s parent company One97 Communications Ltd (OCL) to become a third party UPI app under the multi-bank model under which four banks– YES Bank, State Bank of India, HDFC and Axis Bank- will be included.
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Motilal Oswal also said that there will be a major decline in the revenue of the company which is expected to fall by 27 per cent as it projected a 28 per cent cut in payment processing margin to a range of ~7bp which it primarily attributed to reduced business volumes. It said, “We expect GMV growth to recover gradually, estimating ~20 per cent CAGR over FY25-27E vs. ~45 per cent CAGR witnessed during FY22-24E."
