What changed
India's central bank granted Paytm a tentative approval to operate its digital wallet. In a Friday disclosure, the company said it is permitted to issue and run prepaid payment instruments.
Shares flipped from red to green on the news, ending the session in Mumbai up almost 1%.
Why the wallet mattered
Following the Reserve Bank of India revoking the license of Paytm Payments Bank Ltd. for rule violations, the wallet was largely put on ice earlier this year. That bank ran the wallet, sat within founder Vijay Shekhar Sharma's fintech group, and was distinct from the listed entity, with Sharma owning a 51% stake in it.
Long before UPI - India's instant payments system - spread everywhere, Paytm's wallet helped popularize digital payments from roadside stalls to malls. It served as a major on-ramp for users who later took higher ticket offerings such as loans and insurance, while also keeping balances inside the app and generating commissions.
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Competitive backdrop
Paytm, whose listed parent is One 97 Communications Ltd., was founded by Sharma in 2010, starting with prepaid mobile recharges before leaning into digital payments and banking. A late-2016 currency note ban cemented its standing in India's fintech scene, where it faces PhonePe, controlled by Walmart Inc., and Alphabet Inc.'s Google Pay.
What it means for your portfolio
The comeback of a high-margin wallet could boost sales and profitability. At the same time, Paytm is trying to restore trust, and rising profitability alongside a more robust operating outlook is aiding its recovery from earlier missteps. The stock stumbled after its November 2021 IPO, one of the worst large debuts globally, but it is now retracing years of declines, up almost 50% this year.
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