PAYTM SHARES SURGE 25% IN 3 WEEKS: IS UPI MDR OPTIMISM ALREADY PRICED IN?

Paytm shares have surged over 25% over the past three weeks and hit a fresh 52-week high of Rs 1,605 on Tuesday. The stock has emerged as the new Street favourite as a string of global institutional brokerages upgraded their target prices on the counter on hopes of UPI MDR monetisation.

However, experts that Moneycontrol spoke to cautioned that the stock could be pricing in too much optimism, assuming a favourable policy outcome.

"The stock is already at a 4.5-year high and it discounts a favourable notification. It is advisable to treat MDR as an optionality, not a thesis," said Nitant Darekar, research analyst at Bonanza.

Similarly, Harshal Dassani, business head at INVasset PMS, advised caution to investors as the stock has already priced in a favourable policy outcome.

"Since it's the first time, a global brokerage has given a target price for Paytm above its IPO price. Closing that gap requires the MDR decision to actually arrive. The March 2025 precedent, when the stock fell on a UPI incentive ruling, is a reminder that policy cuts both ways," he said.

Bernstein sees MDR as a game changer

Paytm, for the first time, received a target price above its IPO price amid hopes of UPI MDR monetisation. Bernstein set a target price of Rs 2,200, which is still over 35% above the current market price.

The higher target price came as the global brokerage assumed MDR introduction on UPI transactions into its base case from FY28E onwards.

"We think MDR could lift net payments margins by approximately 3-4 bps (basis points), driving around a 30% increase in FY30E EPS versus our previous forecasts," analysts said.

The brokerage's base case assumes an MDR rate of 35 bps for UPI transactions. It estimates that MDR would apply to around 50% of transaction value, translating into nearly Rs 2,200 crore of incremental EBITDA by FY30E.

Jefferies, Citi also see earnings upside

Similarly, Jefferies raised its target price to Rs 1,600 from Rs 1,450 and revised its earnings estimates, expecting revenue to grow at a 25% CAGR over FY26-29 and EBITDA margins to expand from 6% in FY26 to 18% by FY29.

The brokerage also noted that any introduction of MDR on high-ticket UPI transactions could provide additional upside to its forecasts. Citi too sees room for earnings upside if UPI MDR is implemented.

Currently, credit cards in India typically attract an MDR of about 1.5%, while debit cards attract up to 0.9%. UPI transactions, meanwhile, are currently free for merchants.

Reports suggest that the government is considering a proposal to impose an MDR of 0.3% to 0.5% on transactions above Rs 2,000 for merchants with annual turnover exceeding Rs 1.5 crore.

Jefferies said transactions above Rs 2,000 account for just 4% of merchant payment volumes but about 67% of transaction value.

The brokerage estimates that such a move could create a revenue pool of Rs 5,000-10,000 crore for the payments industry and benefit companies including Paytm.

Earnings strength adds to the bullish case

While the policy is still in the works and it is yet to be decided how much MDR, if any, will be levied on merchants, Paytm had already reported a better-than-expected June quarter performance that triggered a slew of bullish calls.

Currently, Paytm has 17 buy calls, 5 hold and 1 sell call, compared with 10 buy calls, five hold and four sell ratings last year.

Paytm's net profit increased 20% quarter-on-quarter, marking its fifth consecutive quarter of profit, while revenue rose 8% QoQ. The company's EBITDA surged 54%, lifting the margin to 8% from 6% in the previous quarter.

The company also reported its highest-ever quarterly EBITDA, driven by faster merchant GMV growth and strong momentum in its payments and financial services businesses.

Following the earnings, Goldman Sachs expects Paytm's EBITDA margin to double by Q1 FY28, while its application for a wallet licence could become an additional growth driver. The brokerage continues to see strong traction in both offline and online payments.

Morgan Stanley too expects EBITDA margins to rise to about 19% by FY29. It sees revenue growing at 25% over FY26 to FY29.

For now, MDR remains a potential upside trigger rather than a confirmed earnings driver.

2026-08-11T05:47:27Z