(Bloomberg) -- Paytm’s shares are on course to erase losses suffered since the Indian central bank’s crackdown on its payment business earlier this year, after the firm received an approval to onboard new users.
The shares of One 97 Communications Ltd., the payment firm’s parent, jumped as much as 12% on Wednesday — the most in more than two weeks — to 771.70 rupees ($9.2), before paring some of the gains. The stock is now about 2% away from its Jan. 31 level when the central bank ordered to halt much of its business.
The rally came after the National Payments Corporation of India allowed the company to add new users to its unified payments interface (UPI), easing regulatory concerns and heralding greater business stability for the troubled fintech giant.
The stock has more than doubled since hitting a bottom in early May in a selloff triggered by the Reserve Bank of India’s near-shutdown of its banking affiliate.
Paytm reported its first-ever quarterly profit Tuesday, largely due to the sale of its events ticketing business to internet peer Zomato Ltd, while revenue slumped 34% from a year ago, sending the stock lower.
The approval to acquire new users for its online payments business on the UPI should boost efforts to recover lost volume, Bloomberg Intelligence analyst Nathan Naidu wrote in a note.
“The merchant business sequentially increased transactions, merchant base and payment devices, indicating the segment’s growth could accelerate should the firm also receive approval to add new merchants online,” Naidu said on the firm’s second-quarter performance. “These bode well for Paytm’s comeback.”
While the volume of monthly UPI transactions have held above one billion on Paytm this year, its overall market share has declined from 13% in January to 7% in September, as the space sees an influx of new entrants.
Paytm competes with Walmart Inc.-owned PhonePe, Alphabet Inc.’s Google Pay and billionaire Mukesh Ambani’s Jio Financial Services Ltd. in India’s crowded digital payments space.
The latest approval can help Paytm accelerate growth in its gross merchandise value, especially given the festive season in India, according to Jefferies Financial Group analyst Jayant Kharote. “This was among the two key regulatory risks. After this, only RBI payment aggregator approval is pending.”
(Updates share move in second paragraph)
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