One97 Communications, the parent company of Paytm, gained 11% this week, reaching 1,603, marking its biggest weekly jump in four months, extending its strong recovery as investor sentiment around the fintech major remains positive following a series of favourable developments.
The stock has continued to benefit from growing optimism around potential UPI monetisation, after the government considered introducing a nominal merchant discount rate (MDR) on a limited set of UPI merchant transactions above a certain threshold, while keeping consumer and person-to-person payments free.
Adding to the optimism, Bernstein raised its target price on Paytm to ₹2,200 apiece from ₹1,500, while retaining its ‘Outperform’ rating. The brokerage said potential MDR could improve Paytm’s net payment margins by 3-4 basis points, potentially driving a 30% increase in FY30 EPS compared with its previous forecasts.
Paytm shares have never reached Bernstein’s revised target price, which is also above the company’s IPO price of ₹2,150 apiece.
Domestic brokerage firm, JM Financial also raised its target price on Paytm to ₹1,950 from ₹1,500 and reiterated its ‘Buy’ rating, following the enabling amendment clearing Parliament.
The brokerage said the move opens the possibility of MDR being applied to UPI transactions above a defined threshold, creating a new earnings stream for Paytm.
Assuming a 25-basis-point industry-wide MDR and 30% of UPI GMV qualifying for the levy, JM Financial estimates incremental revenue of ₹200 crore in FY27 and ₹440 crore in FY28, with the high-margin nature of the revenue expected to provide a significant boost to profitability.
Paytm’s recovery gathers pace
The stock’s latest gains have extended its broader recovery, with shares having risen 70% from their March low and closed each of the last four months in the green.
The latest weekly rally has further strengthened the stock’s momentum after a period in which easing regulatory headwinds and improving earnings visibility had already helped revive investor interest.
Following the Reserve Bank of India’s restrictions on Paytm Payments Bank in 2024, the company shifted its focus towards its core payments and financial services distribution businesses. It has also been driving growth by onboarding higher-quality merchants and expanding fee-based, scalable revenue streams.
Mutual funds remain confident
Mutual funds have further boosted their stake in the company, during the first quarter of the current fiscal year (Q1 FY27), to an all-time-high level.
As of the end of the June quarter, 43 mutual funds collectively held a 18% stake in Paytm, equivalent to 11.4 crore shares. This marks a notable increase from the 16.60% stake held at the end of the previous quarter in March, according to Trendlyne’s shareholding data.
Domestic funds have been gradually accumulating shares in Paytm over time, with the most substantial rise occurring in the recently concluded quarter.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
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