![Pranav Gundlapalle-1200](https://img.etimg.com/thumb/msid-108030819,width-210,height-158,imgsize-24774,resizemode-75/pranav-gundlapalle-1200.jpg)
What is it that you make of this last salvo by Vijay Shekhar Sharma stepping down?
Pranav Gundlapalle: I think it is again an attempt to distance the One 97 Communications from the PPBL entity. So in the spirit of maybe being late is better than never, there is an attempt to set that up as an independent entity with limited linkages to One 97 Communications. I think that is the objective.
That also probably sets the stage for making more changes at PPBL. So they have reconstituted the board. They could probably bring in a bunch of strategic partners. But would it matter for the listed entity? Maybe not. It is clear that there will be severing of ties between the two entities and what is priced in right now is essentially that the products which were being housed in the PPBL will go away and that will not be available on the Paytm app. So that part is largely priced in. It is more from a listed entity perspective, largely an option value at this stage. If something happens to PPBL, then, on a positive front, that will be a positive surprise.
The regulator will take cognizance of the fact that the management of Paytm, and in this case also PPBL, they, in a sense, want to fix the problem. They want to really set the right narrative with RBI.
Pranav Gundlapalle: I think at this stage, it will take a long time for any change or relaxation to happen. I do not see that happening immediately. So literally, they will start with nothing but more than a license at this stage. So we have to rebuild the entire narrative with PPBL. I do not think it is anything positive as such for the One 97 Communications at this stage. What is more important is establishing that the problems are limited to PPBL because a lot of the price action that we have seen in the last month is based on assumption that the problems will spill over into One 97 Communications and the regulatory updates have confirmed that it will largely stay within PPBL. It does not really spill over into One 97 Communications. And this just reinforces that divide between the two entities.
I was just going through some notes and Macquarie for instance talks about how the lending business might be under threat because the partners are now rethinking their relationship. We have already seen that the number of downloads in the merchants which were subscribing to Paytm have actually moved down. Do you think this is a structural change in the business model now and this is something which is not easy to repair, the people who have moved out?
Pranav Gundlapalle: The lending partners staying out in my view is largely a function of the payment volumes staying or going away. So if the payment volumes remain unimpacted, there is no reason why the lending partners would not come back. I think that is the only risk that they look for. There was no linkage with PPBL even to start with. So I do not think that PPBL going away is a big reason for lenders to stay away. From our interactions and also from the app usage data that we see, the merchant attrition is fairly minimal. We are talking about less than 5% attrition in the daily usage volumes for the Paytm app. So once the company is able to establish that their volumes are 90-95% of what it was before Jan, the lending partners will come back. So I do not think they had any issue with the quality of loans, nor was there a dependence on PPBL. I expect them to come back once the volumes have been established.
Paytm is also trying to have partnerships with other banks. What is the importance of that? What is the meaning of that?
Pranav Gundlapalle: Paytm relied on PPBL for processing its UPI transaction. PPBL acted as a PSP or a Payment Service Provider. Now with that relationship set to expire in mid-March, they are looking for other partnerships. It is something similar to what their competitor PhonePe did when Yes Bank was going through stress. They migrated into several other banking partnerships. Something similar is going to happen here.
We think it is important because given the volume of Paytm, it is important to have more than one partner. So having three or four partners makes complete sense. And this does not involve any sort of KYC or any sort of risk for the bank itself. So most of the banks should be happy to jump on as partners or provide a PSP service for Paytm.
But the mainstay for Paytm, in a sense, of course, is their loan syndication or loan distribution. That is where the MDRs (merchant discount rates) are actually the highest, about 3.5% to 4%. Do you see that getting affected at all?
Pranav Gundlapalle: Not really. If the payment volumes stay intact, I do not see that getting affected.
Pranav Gundlapalle: Yes, it is positive. From the bottom that we saw, what is driving the stock up is incremental news flow confirming that all the problems are restricted to PPBL and One 97 Communications will continue its UPI payments which is 70% of the payment volumes. As long as that gets resolved and that remains unimpacted, there is a significant upside from here.
(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2024 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
Read More News on
(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2024 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price