A proposed amendment to the Payment and Settlement Systems Act has put UPI merchant discount rate (MDR) back in focus. Jefferies estimates that charging MDR on merchant UPI transactions above Rs 2,000 could create an industry revenue pool of Rs 5,000 crore to Rs 10,000 crore by FY28. Among listed payment companies, it expects Paytm and Pine Labs to be among the biggest beneficiaries.
Both companies reported strong Q1 FY27 earnings. One97 Communications posted its highest-ever quarterly EBITDA as merchant payments, consumer payments and financial services maintained growth. Pine Labs continued expanding its merchant network, enterprise business and AI offerings while maintaining its full-year growth guidance. Jefferies estimates MDR could increase Paytm’s FY28 EBITDA and profit by 15% to 35%, while Pine Labs’ EBIT could rise by 10% to 23%, depending on the final framework.
Share price performance
| Period | Paytm | Pine Labs |
| Past 1 month | +18.74% | +3.17% |
| Past 6 months | +21.82% | -28.57% |
| 2026 YTD | +11.98% | -33.74% |
| Past 1 year | +37.06% | -37.91% |
| Past 5 years | -7.32% | NA |
Paytm vs Pine Labs: Business model
The biggest difference between the two lies in how they generate revenue.
Paytm’s business spans merchant payments, consumer payments and financial services. Payment processing, merchant subscriptions, loan distribution and wealth products are now its main earnings drivers. In Q1 FY27, the company identified merchant payments, consumer payments, financial services and AI-led monetisation as its four growth engines.
Pine Labs has built its business around merchants and enterprises. Besides payment acceptance, it earns from payment processing, issuing, acquiring, commerce software and affordability products. It is also expanding internationally while adding AI-based products across payments and merchant services.
Amrish Rau, Chief Executive Officer, Pine Labs, said the company remains focused on building “a world-class fintech coming out of India, coming out of the Asian markets.”
Vijay Shekhar Sharma, Founder and Chief Executive Officer, Paytm, said, “The past is behind us and now we are having cash in our hand and the aggression in our mind and body.”
Business comparison
| Parameter | Paytm | Pine Labs |
| Core business | Consumer and merchant payments | Commerce infrastructure |
| Revenue mix | Payments, subscriptions, financial services | Payments, issuing, acquiring, commerce software |
| Consumer business | Yes | Limited |
| International presence | Limited | India, Southeast Asia and Middle East |
| AI focus | Consumer monetisation | Merchant operations and payments |
Paytm vs Pine Labs: Growth drivers
Merchant payments remained the biggest growth driver for both companies during Q1 FY27.
Paytm’s merchant GMV increased to Rs 7.1 lakh crore in Q1 FY27 from the year-ago period, up 31%. Merchant subscriptions rose to 1.57 crore from 1.30 crore, while customer UPI GTV increased to Rs 5.9 lakh crore, up 45% YoY. Monthly transacting users reached 8 crore, an increase of 60 lakh over the previous year. The company said its consumer payments business grew at 2.2 times the industry’s UPI growth rate.
Pine Labs continued adding merchants across enterprise and mid-market segments. More than 70% of transactions processed on its offline devices were through UPI during Q1 FY27, while the average UPI ticket size exceeded Rs 1,400. The company also added more than 1.3 lakh digital commerce points, representing over 40% YoY growth.
Rau said Pine Labs recruited around 500 sales employees over the past six months to support merchant expansion. Sharma said Paytm would continue adding merchants with a focus on monetisation instead of market share alone.
Operating metrics (Q1 FY27)
| Metric | Paytm | Pine Labs |
| Merchant GMV | Rs 7.1 lakh crore | NA |
| Merchant GMV growth | 31% YoY | NA |
| Customer UPI GTV | Rs 5.9 lakh crore | NA |
| Monthly transacting users | 8 crore | NA |
| Merchant subscriptions | 1.57 crore | NA |
| UPI share of offline transactions | NA | More than 70% |
| Average UPI ticket size | NA | More than Rs 1,400 |
Paytm vs Pine Labs: Profitability
Both companies reported profitable quarters, but the earnings drivers were different.
Paytm reported revenue of Rs 2,448 crore in Q1 FY27, up 28% YoY, while EBITDA increased to Rs 203 crore from Rs 72 crore in Q1 FY26, up 182%. EBITDA margin expanded to 8% from 3.5% a year ago, helped by faster revenue growth and lower growth in indirect expenses. The company also said AI-led automation is improving productivity across businesses.
Madhur Deora, President and Group CFO, Paytm, said, “The revenue growth acceleration and the fact that indirect expenses are growing significantly slower than revenue growth… AI structurally not only accelerates operating leverage, it also expands the opportunity for higher margins over time because you’re just able to do more with less.”
Pine Labs maintained profitability while increasing investments. The company reported around 20% YoY revenue growth in Q1 FY27, broadly in line with its 21% to 23.5% full-year guidance. Profit after tax came in at around Rs 20 crore, while operating cash flow was around 16%. Management said higher spending on sales hiring, cloud infrastructure and telecom capabilities weighed on EBITDA during the quarter.
Amrish Rau, Chief Executive Officer, Pine Labs, said, “We have gone ahead and front-loaded our investments in sales people, telecom infrastructure, network infrastructure and also some cloud capabilities. That has impacted our EBITDA slightly.”
Financial comparison (Q1 FY27)
| Metric | Paytm | Pine Labs |
| Revenue growth | 28% YoY | Around 20% YoY |
| EBITDA | Rs 203 crore | Not disclosed |
| EBITDA growth | 182% YoY | NA |
| EBITDA margin | 8% | NA |
| PAT | NA | Around Rs 20 crore |
| Operating cash flow | NA | Around 16% |
Paytm vs Pine Labs: Capital allocation
Paytm continues investing in merchant payments, consumer payments and wealth products, while Pine Labs is spending on sales expansion, AI capabilities and international growth. During Q1 FY27, Pine Labs added around 500 sales employees, while Paytm reiterated its focus on acquiring customers and merchants that can generate long-term revenue.
Paytm vs Pine Labs: AI and MDR
Artificial intelligence is becoming a larger part of both businesses, although the use cases differ.
Paytm is using AI to improve customer acquisition, increase engagement and expand financial services distribution. The company expects AI to support both revenue growth and margins through higher operating efficiency and better cross-selling across lending and wealth products.
Pine Labs is integrating AI into merchant services. The company said nearly 90% of new code across four business divisions is now written using AI. It has also introduced Agentic Payments, SignalIQ for AI-led underwriting and AI assistants for merchants while expanding these capabilities across overseas markets.
The bigger near-term trigger, however, remains MDR. Jefferies estimates that introducing MDR on UPI merchant transactions above Rs 2,000 could create an industry revenue pool of Rs 5,000 crore to Rs 10,000 crore by FY28. Paytm could generate Rs 300 crore to Rs 730 crore in additional annual revenue, lifting FY28 EBITDA and profit by 15% to 35%. Pine Labs could add Rs 50 crore to Rs 150 crore in revenue, increasing FY28 EBIT by 10% to 23% and profit after tax by 9% to 21%.
Jefferies’ MDR comparison
| Metric | Paytm | Pine Labs |
| Incremental revenue | Rs 300-730 crore | Rs 50-150 crore |
| EBITDA/EBIT impact | 15-35% | 10-23% |
| PAT impact | 15-35% | 9-21% |
Jefferies added that payment companies are in a stronger position to retain any incremental MDR income because the industry has become more disciplined on pricing and profitability, although the final outcome will depend on the structure approved by regulators.
Paytm vs Pine Labs: Risks
The return of UPI MDR remains subject to multiple approvals, making it an opportunity rather than an assumption in both companies’ outlook. Jefferies said the proposed amendment to the Payment and Settlement Systems Act is only the first step, after which the Reserve Bank of India and NPCI will need to decide the final framework.
Until then, Paytm’s execution will depend on sustaining merchant payment growth, expanding financial services and improving monetisation across its consumer base. Pine Labs, meanwhile, will have to convert its investments in sales, AI and international expansion into higher transaction volumes and profitability. Both companies also operate in an intensely competitive payments market where pricing, merchant acquisition and product innovation continue to influence earnings.
Paytm vs Pine Labs: Management outlook
Both management teams indicated that growth priorities remain unchanged irrespective of any regulatory outcome.
Vijay Shekhar Sharma, Founder and Chief Executive Officer, Paytm, said the company expects profitability to improve further while maintaining discipline on merchant and consumer acquisition. “Going forward, I think we should be able to increase our profitability further in consequent quarters. We just don’t want market share for the heck of it. We want monetisation.”
Sharma also said AI is expected to contribute to future revenue streams beyond payments and financial services.
Pine Labs maintained its FY27 revenue growth guidance of 21% to 23.5%. Amrish Rau, Chief Executive Officer, Pine Labs, said the company remained comfortable with its guidance despite continuing investments in sales, technology and cloud infrastructure. “We came in at about 20% on a year-on-year growth. We feel very, very comfortable with where we are.”
Paytm vs Pine Labs: Brokerage view
Jefferies expects both companies to benefit if UPI MDR is introduced, but it believes Paytm is better placed because of its larger merchant acquiring business.
According to the brokerage, MDR on merchant UPI transactions above Rs 2,000 could create an industry revenue pool of Rs 5,000 crore to Rs 10,000 crore by FY28. Paytm could generate Rs 300 crore to Rs 730 crore in incremental annual revenue, increasing FY28 EBITDA and profit by 15% to 35%. Pine Labs could add Rs 50 crore to Rs 150 crore in revenue, with FY28 EBIT rising by 10% to 23% and profit after tax by 9% to 21%, depending on the final MDR structure. Jefferies also expects merchant acquirers to retain a meaningful share of MDR because they bear a large part of the payment infrastructure cost.
| Brokerage | Paytm | Pine Labs |
| Jefferies’ view | Larger beneficiary from MDR | Positive beneficiary from MDR |
| Incremental revenue | Rs 300 crore to Rs 730 crore | Rs 50 crore to Rs 150 crore |
| Earnings impact | EBITDA and profit up 15% to 35% | EBIT up 10% to 23%; PAT up 9% to 21% |
Conclusion
If UPI MDR returns, both Paytm and Pine Labs stand to benefit, but the extent of that benefit will depend on the final framework and how the revenue is shared across the payments ecosystem. Even without that trigger, the June quarter showed both companies are relying on different levers to grow.
Paytm is building on its consumer ecosystem, financial services and improving profitability, while Pine Labs is expanding its merchant network, enterprise offerings and international business. The next few quarters will reveal whether those strategies deliver faster earnings growth, while any decision on MDR could provide an additional tailwind rather than define the investment case for either company.
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