Mumbai (Maharashtra) [India], September 16 (ANI): India’s decision to introduce a merchant discount rate on UPI person-to-merchant transactions above Rs 2,000 has prompted brokerages to sharply raise their earnings and valuation assumptions for One 97 Communications (Paytm), with analysts describing the move as the point at which UPI acquiring stops being a subsidised utility and becomes a commercial business.
Emkay Global raised its target price on Paytm by 41.2 per cent to Rs 2,400 from Rs 1,700, maintaining a BUY rating, implying an upside of close to 39 per cent over the September 15 close of Rs 1,731. The brokerage estimates UPI MDR revenue of about Rs 1,120 crore for Paytm in FY28 on deliberately conservative assumptions of a 10 basis point realised take-rate, adding roughly Rs 43,400 crore to its present valuation of Paytm.
In its assessment, Emkay states that UPI acquiring now “carries a commercial revenue model that is contractual, recurring and scales with value, in place of a discretionary annual subsidy.”
“This will make the payment business structurally self-sustaining, making the business model much more resilient,” it said.
Goldman Sachs, which retains a Buy rating on the stock, said the announced framework could drive a material earnings upgrade, estimating potential upside of 40-70 per cent to Paytm’s FY28 EBITDA estimates. Its top-down and bottom-up analysis both point to incremental EBITDA of about Rs 1,400 crore in FY28 in a high-end scenario. The brokerage pegs the industry-wide revenue pool from the announced MDR at roughly Rs 20,600 crore at current run-rates, and noted that the announced MDR rate came in ahead of what investors had been positioned for.
Goldman Sachs said the announcement had three incremental positives including a higher 40 basis points MDR on person-to-merchant transactions compared with the expected 20–30 basis points; 2 basis points MDR on capital-market transactions and slab-based MDR even on utilities and other categories; and no slab-based merchant turnover requirement except zero MDR for small merchants receiving less than Rs 100,000 per month through UPI.
Under the framework announced by NPCI, a merchant discount rate of 0.4 per cent will apply to person-to-merchant UPI transactions above Rs 2,000 from October 15, 2026, capped at Rs 300 for transactions of Rs 75,000 and above, with P2M transactions up to Rs 2,000 and all peer-to-peer transfers remaining free.
Small merchants under the P2PM category, receiving up to Rs 1 lakh a month through UPI QR directly into their accounts, continue to attract zero MDR, while railways, telecom, insurance and fuel are among categories that will pay a flat Rs 5 per transaction above the Rs 2,000 threshold. UPI app providers have also been barred from levying platform fees on customers, preserving the consumer-free architecture that has driven UPI’s adoption. NPCI sets a 0.4 per cent fee on UPI merchant payments above Rs 2,000, effective Oct 15.
NPCI has said there is no impact on transactions up to Rs 2,000, which account for more than 95 per cent of UPI P2M volumes, and that the intent is to keep UPI accessible for everyday payments while supporting long-term ecosystem sustainability.
The framework lands at a point of visible operating momentum for Paytm.
The company reported a 79 per cent year-on-year rise in net profit to Rs 220 crore for the June 2026 quarter, with revenue from operations up 28 per cent to Rs 2,448 crore, EBITDA up 182 per cent on the year to Rs 203 crore, and GMV up 31 per cent. Paytm’s UPI market share by value has risen for five consecutive quarters. Analysts note that MDR revenue accrues on merchant rails and relationships already built and paid for, making the incremental flow-through to profit unusually efficient. (ANI)
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