One 97 Communications, the parent firm of Paytm jumped over 3% on Thursday after Citi upgraded its recommendation on the stock.

What Happened: Global broker Citi has upgraded the firm to “buy” from “sell” and raised the target price ₹900, which represents a nearly 21% upside from Wednesday’s closing price.

The upgrade came as the brokerage sees regulatory risks related to foreign direct investment, National Payments Corporation of India (NPCI) and Paytm Payments Bank (PPBL) simmering down. This comes after the company received NPCI’s approval to onboard new UPI users.

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The company has also announced plans to provide default loss guarantees (DLG) to its lending partners in the merchant loans distribution business, in accordance with the Reserve Bank of India‘s (RBI) guidelines, the brokerage noted.

In the second quarter, the fintech giant’s revenues were in line with Citi’s expectations. A substantial reduction in operating expenses resulted in a significant outperformance in adjusted EBITDA, with a loss of ₹186 crore versus Citi’s forecast of ₹260 crore. As a result, the earnings forecasts and the valuation multiple have been updated to 42 times the enterprise value to adjusted EBITDA.

On Wednesday, the company’s shares shot up as much as 11% amid brokerages’ optimism, to reach January levels before the RBI imposed operational restrictions on Paytm Payments Bank.

Price Action: Paytm’s shares were up 3.15% to ₹768.60 on Thursday morning.

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