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Shares of One 97 Communications Ltd., the parent company of fintech platform Paytm, surged more than 11% to Rs 762.20 on Tuesday, marking a complete recovery from January’s regulatory crackdown.

The stock climbed past its pre-restriction level of Rs 761.20, at the time of writing this article) erasing losses triggered when the Reserve Bank of India imposed sanctions on its payments bank unit earlier this year.

RBI’s directive forced the company to cease onboarding new UPI customers and froze key payment services, dealing a significant blow to its market position. The sanctions, which lasted from March to October, created uncertainty around Paytm’s ability to maintain its momentum in the digital payments space, leading to a sharp decline in its stock price.

However, with yesterday’s approval from the National Payments Corporation of India (NPCI) to resume UPI registrations, Paytm has regained one of its core growth levers. This re-entry into the UPI ecosystem is a crucial turning point, signaling that the company is ready to rebuild its user base and regain its footing.

Paytm is now betting on its First Loss Default Guarantee (FLDG) lending model to drive future growth. By assuming part of the loan default risk, Paytm aims to give hesitant lending partners the confidence to extend more credit, especially to borrowers with limited credit histories.

“We are confident that our FLDG-backed lending will be a cornerstone for growth, enabling us to expand our credit offerings while maintaining profitability,” said CEO Vijay Shekhar Sharma during a recent analyst call. With this model, Paytm is looking to scale its lending partnerships in the coming quarters, viewing it as a key strategy to boost both volumes and profitability.

Financially, Paytm’s Q2 FY24 results were bolstered by the sale of its ticketing business to Zomato for Rs 2,048.4 crore. This transaction provided a gain of Rs 1,345.4 crore, propelling the company to a quarterly profit of Rs 930 crore, compared to a loss of Rs 840.1 crore in Q1 FY24. Additionally, revenue from operations climbed 10.51% quarter-over-quarter, hitting Rs 1,659.5 crore.

Further, the company informed the BSE that it has a cash balance of Rs 9,999 crore as of the quarter ending September 2024 compared to Rs 8,108 crore in the previous quarter.

In the filing, the company reported that new subscription-paying device merchant sign-ups for its merchant subscription business “have surpassed levels seen in January 2024”, bringing the total number of merchant subscriptions to 1.12 crore. In an effort to optimise resources, Paytm plans to “pick up inactive devices and redeploy them after refurbishment,” which will help reduce capital expenditures, it added.

(This is a developing story)