Shares of One 97 Communications Ltd, the parent company of Paytm, have experienced a significant rally, climbing over 33% in the past month and an impressive 55% in the last three months. This rapid ascent has led many investors to question whether it's time to book profits or if the fintech giant still holds substantial upside potential.
Bernstein Raises Target Price Above IPO Level
Global brokerage Bernstein has maintained its 'Outperform' rating on Paytm, significantly increasing its target price to Rs 2,200, up from Rs 1,500 previously. Notably, this revised target surpasses Paytm's initial public offering (IPO) price of Rs 2,150 for the first time, signaling strong confidence from the brokerage.
The company's strong performance is underpinned by its recent financial results. For the quarter ended June 30, 2026, Paytm reported a 79% year-on-year (YoY) increase in consolidated net profit, reaching Rs 220 crore, compared to Rs 123 crore in the same period last year. Revenue from operations also saw a healthy 28% YoY growth, rising to Rs 2,448 crore from Rs 1,918 crore a year earlier.
Paytm attributed these robust figures to several key factors, including higher payment transaction volumes and values, an increase in merchant subscriptions driven by its popular Soundbox devices, and enhanced revenue from the distribution of financial services, such as personal and merchant loans.
Analyst Views: Profit Booking vs. Continued Growth
Amid the bullish trend, analysts offer varied perspectives. Kranthi Bathini, Equity Strategist at WealthMills Securities, suggested that "Investors who have entered around the lower price levels may consider taking some profits to recover their initial investment, while retaining the remaining holding."
From a technical standpoint, AR Ramachandran, a Sebi-registered research analyst at Tips2trades, observed that "Paytm's stock is bullish but overbought on daily charts with next resistance at Rs 1,728. Investors should keep booking profits as a daily close below the support of Rs 1,656 could trigger a fall towards Rs 1,538 in the near term."
UPI MDR Potential Driving Future Growth
A significant factor in Bernstein's optimistic outlook is the potential introduction of a Merchant Discount Rate (MDR) on UPI transactions. The brokerage has incorporated this into its base case from FY28E, projecting that MDR could lift net payments margins by 3-4 basis points, potentially driving a 30% increase in FY30E Earnings Per Share (EPS).
This view aligns with recent discussions from the Ministry of Finance regarding the possibility of implementing an MDR on UPI transactions. The proposal under consideration involves an MDR of approximately 0.4% on transactions exceeding Rs 2,000, primarily targeting larger merchants above a specified turnover threshold. Small shopkeepers and everyday consumer-to-consumer transfers are expected to remain outside this proposed framework.