Shares of One 97 Communications Ltd, the parent company of fintech platform Paytm, have seen a significant uplift as leading brokerage firms maintain a positive outlook and substantially increase their price targets. This optimism is primarily driven by the anticipated introduction of a Merchant Discount Rate (MDR) on select UPI transactions, which analysts believe could unlock a new and lucrative earnings stream for Paytm.
Brokerages See Strong Upside Potential
Several brokerages have revised their price targets for Paytm shares upwards by approximately 30 percent, reflecting confidence in the company's future monetization capabilities. Bernstein, for instance, has raised its target price to Rs 2,200, surpassing Paytm's initial public offering (IPO) price of Rs 2,150.
BofA Securities has reiterated its 'Buy' rating, increasing its price target to Rs 1,775 from Rs 1,560. The firm highlights strong momentum across Paytm’s core businesses, including the Soundbox segment, merchant and consumer lending, and continued gains in UPI market share. BofA analysts project an 18-24 percent upside risk to FY28-30 Earnings Per Share (EPS) from the introduction of MDR on specific UPI transactions. They also see potential catalysts in a restored wallet license and the implementation of UPI market-share caps, estimating a possible Rs 100-115 crore future EBITDA contribution from the wallet business if its license is reinstated.
JM Financial Ltd. also weighed in, noting that recent parliamentary amendments pave the way for MDR application on UPI transactions beyond a defined threshold. This development is expected to open a new revenue stream for Paytm. JM Financial estimates incremental revenue of Rs 200 crore in FY27 and Rs 440 crore in FY28, with a high flow-through to profitability due to minimal associated costs. This could result in incremental adjusted EBITDA of Rs 130 crore and Rs 410 crore for FY27E and FY28E, respectively.
UPI MDR: A Game Changer?
Media reports suggest a potential MDR of 25-40 basis points, although the final rate, transaction threshold, and revenue-sharing mechanisms are still under discussion. Analysts anticipate that MDR will be applied selectively to larger merchants and higher-value UPI transactions, while smaller merchants and consumers are likely to continue enjoying free UPI services.
Recent Financial Performance and Risks
Paytm reported robust financial results for the June 2026 quarter, with net profit surging 79 percent year-on-year (YoY) to Rs 220 crore. Revenue from operations increased by 28 percent YoY to Rs 2,448 crore, and EBITDA soared 54 percent YoY to Rs 203 crore, achieving an 8.3 percent margin. The company's Gross Merchandise Value (GMV) also grew by 31 percent YoY.
Despite the positive sentiment, analysts caution about potential risks. Paytm's stock has already seen significant gains, rising nearly 15 percent in the last week, 20 percent in the last month, and almost 50 percent in the last six months. This suggests that a substantial portion of the potential benefits from MDR may already be priced into the stock. Key risks include intense competition, a lower-than-expected MDR rate, or a high turnover threshold that could narrow the eligible transaction base.