- Bernstein maintained its outperform rating and raised the price target for Paytm to Rs 2,200 from Rs 1,500.
- Paytm shares rose 9.88% to close at Rs 1,584.10 on NSE after hitting a 52-week high of Rs 1,598.50.
- The market cap of One97 Communications crossed the Rs one lakh crore mark, standing at Rs 101,561.90 crore.
- Other fintech stocks like Pine Labs and Mobikwik also gained, with Pine Labs closing 4.90% up at Rs 162.01 and Mobikwik gaining 3.49% to close at Rs 207.30.
- Jefferies estimates that the proposed MDR could increase Paytm's FY28 EBITDA and profit by 15% to 35%.
- The proposed MDR fee could lift Paytm's net payment margins by 3-4 basis points, potentially driving a 30% increase in earnings per share for FY30.
- Experts indicated that the proposed UPI monetisation will boost profit margins of other payment aggregators including PhonePe, GooglePay, BharatPe, RazorPay, and PayU.
- The Bernstein report assumes a headline MDR of around 35 basis points applicable only to a subset of UPI Payment to Merchant transactions.
Paytm's stock price soared 9.88% to Rs 1,584.10 following Bernstein's upgrade of its target price to Rs 2,200, up from Rs 1,500. The increase is attributed to the anticipated introduction of Merchant Discount Rate (MDR) charges on large UPI transactions, which could enhance profitability across the fintech sector.
Bernstein's report suggests that the proposed MDR could elevate Paytm's net payment margins by 3-4 basis points, potentially leading to a 30% increase in earnings per share for FY30. The market capitalization of One97 Communications, Paytm's parent company, exceeded Rs 1 lakh crore, closing at Rs 101,561.90 crore.
Other payment aggregators also experienced gains, with Pine Labs shares rising 4.90% to Rs 162.01 and Mobikwik increasing 3.49% to Rs 207.30. Analysts from Jefferies estimate that the MDR could boost Paytm's FY28 EBITDA and profit by 15% to 35%, while Pine Labs could see a 10-23% increase, depending on the final MDR framework.
Experts believe that the proposed UPI monetization will enhance profit margins for various payment platforms, including PhonePe, GooglePay, BharatPe, RazorPay, and PayU. Bernstein's analysis indicates that even a narrow MDR application could capture a significant share of payment value, estimating that around 50% of transaction value would be subject to the charges, translating to approximately Rs 2,200 crore in incremental EBITDA by FY30.
“Bernstein's base case assumes a headline MDR of around 35 basis points on a subset of UPI merchant transactions, estimating Paytm can realize 3-4 basis points of incremental net payment margin, translating to Rs 2,200 crore of incremental EBITDA by FY30. Jefferies separately estimates MDR could lift Paytm's FY28 EBITDA and profit by 15-35%.”
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