global financial services chief macquarie Not upbeat and sees 40% below its issue price described as a ‘cash guzzler’.
However, the report points to a major challenge that could potentially hinder UPI’s meteoric rise and move beyond a point with more players vying for the payment pie.
The global brokerage says that big revenue can be achieved only when it starts lending. And a banking license or even a small finance bank approval from the regulator is a far cry right now.
One of the major reasons for this is the massive Chinese ownership in Paytm.
“In our view, obtaining a small finance bank license may be difficult, as Chinese controlled firms hold more than 30% stake in Paytm,” the report said.
Rising geopolitical tensions have also made banking licenses difficult for a firm with Chinese investments.
“Due to geopolitical tensions between India and ChinaThe Indian government has been very careful in approving investment proposals from China. Both the RBI and the government, in our view, would be careful in approving proposals where Chinese firms have a majority stake, especially in more scrutinized areas such as banking,” the report said.
The global brokerage also ruled out the possibility of getting a nod from the regulator for digital banking licenses.
Currently, Paytm has a payments bank license which prevents it from giving credit. It can apply for a small finance bank license after completing five years of commercial operation of the Payments Bank.
However, Macquarie doesn’t see it as a viable contender, mainly because of its Chinese connections.
“Alibaba and Ant Group still hold around 31% stake in One97 Communications (Paytm parent entity) after the IPO. If we consider the passing of Paytm Payments Bank, the Chinese controlled entities still hold around ~15% stake. Payments Bank. This may not be viewed favorably by the regulator,” the report said.