Paytm shares jump 5% after Bernstein assigns target price above IPO price for first time

Shares of One97 Communications, the parent company of payments aggregator Paytm, rallied 4.5% to their day’s high of Rs 1,506 on the BSE on Monday after Bernstein raised its target price on the stock to Rs 2,200 (52%upside) from Rs 1,500, while retaining its Outperform rating.

The revised target is the highest on the Street and marks the first time Paytm has received a target price above its IPO price.

Paytm made its stock market debut in July 2021 at an issue price of Rs 2,150, a level the stock has not returned to since its listing. Bernstein said it has incorporated the introduction of the merchant discount rate (MDR) on UPI transactions into its base case from FY28 onwards.

The target price hike comes as Bernstein incorporates the introduction of MDR on UPI transactions into its base case from FY28E onwards. The brokerage expects MDR to improve Paytm's net payments margin by around 3-4 basis points, resulting in an estimated 30% increase in FY30E EPS compared with its previous forecasts.

Bernstein said recent comments from the Ministry of Finance, along with legislative changes removing the statutory prohibition on charging MDR on UPI transactions, suggest the discussion has shifted from whether MDR will return to when and in what form. It has therefore moved UPI monetisation from its optionality assumptions into its base-case forecasts, with the benefits phased in from FY28E onwards.

The brokerage assumes a headline MDR of around 35 basis points, applicable only to a subset of UPI P2M transactions. Given the skew in UPI transaction values, Bernstein estimates that even a limited charging perimeter could cover a meaningful portion of payment value. It expects MDR to apply to around 50% of transaction value, with Paytm realising around 3-4 basis points of incremental net payments margin. This is estimated to translate into around Rs 22 billion of additional EBITDA by FY30E.

Also read: Paytm attracts more Gen Z users as its UPI payments growth outpaces industry

"Competitive intensity in merchant acquiring could increase further, as a result, realised economics could prove to be lower than published rates," Bernstein said in its note.

The government's position on UPI charges also remains in focus. Over the weekend, it said consumers will not be charged for UPI transactions. If MDR is introduced, it will apply only to select merchant transactions above a certain threshold. The government also said a revenue model is needed to make UPI self-sustaining, given the continued investment required in cybersecurity, fraud provision and infrastructure.

Paytm Q1 results

The company reported strong quarterly earnings. For the quarter ended June 2026, the fintech company posted a consolidated net profit of Rs 220 crore, up 79% from Rs 123 crore in the corresponding quarter last year.

The company's board also decided against proceeding with a bonus issue, saying it would instead continue focusing on compounding growth and profitability to create long term shareholder value.

"After evaluating the proposal from the perspective of long term shareholder value and due deliberation, the Board was of the view that the company should continue to focus on further compounding growth and profitability for shareholder value creation. Accordingly, the Board decided not to proceed with the said proposal at this time," the company said.

Instead, the board approved an additional investment of Rs 100 crore through subscription to equity shares of its wholly owned subsidiary, Paytm Money.

Read more: Paytm remains majority Indian-owned for 2nd consecutive quarter

Revenue from operations rose 28% year on year to Rs 2,448 crore from Rs 1,918 crore. On a sequential basis, revenue increased 8% from Rs 2,264 crore in the March quarter. Total income for the quarter stood at Rs 2,630 crore, up 22% from Rs 2,159 crore a year ago and higher than Rs 2,442 crore reported in the previous quarter.

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