Paytm parent One97 Communications’ shares were flat on Monday even as global brokerage Citi has given the fintech’s stock a buy rating.

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At 11:52 am, Paytm shares were trading 0.23 percent lower at Rs 729.50 on BSE. Though the stock has advanced over 2 percent in the past five days, it has fallen more than 45 percent in 2022 so far (year-to-date) as against the benchmark Sensex which has risen close to 2 percent during the period.

However, Citi has set a target price of Rs 998 for the stock, which means it sees a 37 percent upside from Friday’s closing price of Rs 727.85 on BSE.

According to the brokerage, the likely cap on merchant discount rates on prepaid payment instruments (on both wallet and pre-paid cards) is in line with the Reserve Bank of India’s (RBI) August discussion paper. However, full KYC-ed wallet interoperability across UPI QRs increases wallet salience (as Paytm has leading issuing market share) and may aid monetisation.

Citi was referring to the RBI paper in which it sought feedback on whether the central bank should regulate merchant discount rates on PPI transactions. It also sought suggestions whether it is reasonable to charge high MDR (in sync with MDR levied on credit card transactions) for PPI transactions, if charges structure for merchant payments be akin to that of debit cards, and if charges for cash withdrawal using PPIs should be regulated.

Also Read: From SBI to HDFC Bank, check per day UPI transaction limit of top banks

The brokerage has identified Paytm's growth in monthly transacting users (MTUs) device rollouts, and lending distribution through upselling as key focus areas.

Citi also said that cost controls in marketing, operating leverage, and improvement in contribution margins are driving the adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) of Paytm in September.

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