Pranav Gundlapalle, Senior Research Analyst at Sanford C Bernstein, says that the recent surge in the Paytm stock is due to incremental news flow confirming that all the problems are limited to Paytm Payments Bank Ltd (PPBL). He highlights that One 97 Communications, the parent company of Paytm, will continue its UPI payments, which account for 70% of the payment volumes. As long as the issues remain confined to PPBL and do not impact UPI payments, there is a significant upside potential for the stock.

Commenting on the recent step taken by Vijay Shekhar Sharma, the founder of Paytm, to step down from PPBL, Gundlapalle mentions that this decision seems to be an attempt to establish PPBL as an independent entity with limited linkages to One 97 Communications. He believes that this move could pave the way for further changes at PPBL and the introduction of strategic partners.

However, Gundlapalle clarifies that these developments primarily affect PPBL and the products housed within it. The listed entity, Paytm, has already priced in the expectation that the products from PPBL will be removed from the Paytm app. He describes the current scenario for Paytm as largely an option value, with the potential for positive surprises if the issues with PPBL are resolved smoothly.

Regarding the relationship between Paytm and its lending partners, Gundlapalle explains that their return is contingent on the payment volumes remaining unaffected. If the payment volumes remain stable and reach 90-95% of the pre-January levels, the lending partners are likely to come back. He assures that the lending partners’ reluctance is not linked to PPBL, and as long as the volumes are maintained, the quality of loans and the absence of dependence on PPBL will encourage the partners to return.

Gundlapalle also discusses Paytm’s efforts to establish partnerships with other banks for UPI transactions, similar to what its competitor PhonePe did when Yes Bank faced challenges. He emphasizes the importance of having multiple banking partners for a high-volume platform like Paytm and believes that most banks would be keen to join as partners or provide payment service provider (PSP) services to Paytm.

In conclusion, Gundlapalle asserts that the recent developments surrounding Paytm and PPBL have a limited impact on the listed entity, Paytm. He sees these developments as positive, with a significant upside potential for Paytm’s stock as long as the problems remain restricted to PPBL and UPI payments continue unaffected.