Buy One 97 Communications Ltd For Target Rs 1,500 By Emkay Global Financial Services Ltd
The RBI has cancelled the banking license of Paytm Payments Bank (PPBL), effective 24-Apr-26. However, we do not see any financial or operational impact on Paytm, as all commercial agreements with PPBL were terminated and the equity investment was fully impaired by Mar-24. While the tone of the order is severe, Paytm is legally ring-fenced. Also, the RBI's grant of the final Payment Aggregator license to Paytm in Nov-25 signals comfort with the listed entity's compliance posture. Valuations at 29.8x FY28E EV/EBITDA and 35.1x FY28E P/E are attractive. Considering cash on books of Rs129bn, the long growth runway for payments and financial services, and various optionalities (such as BNPL, Wallet, and scale-up of RuPay credit cards), we retain BUY and DCF-based TP of Rs1,500.
PPBL license cancellation a formality; no financial impact on Paytm
The RBI cancelled PPBL’s banking license, effective 24-Apr-26, citing non-compliance with license conditions. However, all commercial agreements between Paytm and PPBL were terminated by Mar-24, and the equity investment was fully impaired as of 31-Mar-24. Hence, we do not see any financial impact on Paytm’s business. The license cancellation has come after the RBI asked PPBL to stop accepting deposits from 31-Jan-24. We note that PPBL has been in an effective run-down since Feb-24 when fresh deposits were barred. The license cancellation formalizes a de facto closure
Regulatory tone seems harsh; PA license grant underscores regulatory comfort
We believe the RBI's language, citing management conduct "prejudicial to the interest of depositors as also the public interest" and concluding that "no useful purpose or public interest would be served by continuation" is severe. While Paytm is legally ring-fenced, the tone of the order creates perception risk, in our view. However, we note that for over the past 2 years, PPBL was operating independently, with no board or management involvement from Paytm. Also, the RBI had granted the in-principle Payment Aggregator (PA) license on 12-Aug-25, with the final PA license granted on 26-Nov-25, signaling that the regulator is comfortable with the listed entity's compliance posture
Outlook and valuations: Core business trajectory intact
We do not see any impact of the PPBL license cancellation on Paytm’s financials. We build in ~24% revenue CAGR for Paytm over FY26-28E. We see a long growth runway for the company, with increasing adoption of credit products, such as RuPay credit card and Postpaid. The stock trades at 29.8x FY28E EV/EBITDA and 35.1x FY28E P/E. We retain BUY and DCF-based TP of Rs1,500, as we remain confident about Paytm’s execution in its core business model of merchant acquisition and financial services cross-sell
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