Bernstein has raised its target price on One97 Communications, the parent of Paytm, as the potential introduction of a merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions could open a new monetisation opportunity for the company. The brokerage has incorporated the potential change into its base case from FY28E and expects it to strengthen Paytm’s longer-term earnings profile.
Bernstein on One97 Communications: ‘Outperform’
Bernstein retained its ‘Outperform’ rating and raised its target price to Rs 2,200 from Rs 1,500, indicating an upside of around 36.3%.
The brokerage retained a 30x FY30e price-to-earnings multiple and raised its FY30 earnings-per-share estimate to Rs 106, around 30% above its earlier forecast.
Why UPI MDR matters for Paytm
Bernstein said recent comments from the Ministry of Finance, along with legislative changes removing the statutory prohibition on charging MDR on UPI transactions, had shifted the discussion from whether MDR would return to “when and in what form.”
“MDR on UPI is round the corner,” Bernstein said.
The brokerage assumed a headline MDR of around 35 basis points, with the charge applying to a subset of UPI person-to-merchant transactions. Its model assumed that transactions representing around 50% of UPI value could fall within the potential charging framework.
Paytm could benefit through higher payments margins
Bernstein estimated that Paytm could realise around 3-4 basis points of additional net payments margin if UPI MDR is introduced along the lines assumed in its model.
The brokerage estimated the resulting benefit at around Rs 2,200 crore of incremental earnings before interest, taxes, depreciation and amortisation by FY30E.
“We assume Paytm realises ~3-4 basis points of incremental net payments margin,” Bernstein said.
| Key assumption | Bernstein estimate |
| Headline MDR | 35 basis points |
| UPI transaction value potentially covered | 50% |
| Additional net payments margin | 3-4 basis points |
| FY30E incremental earnings before interest, taxes, depreciation and amortisation | Rs 2,200 crore |
| FY30E earnings per share | Rs 106 |
Source: Bernstein.
The main risk is the rate Paytm can retain
Bernstein said the key uncertainty was no longer simply whether MDR would be permitted. Instead, the focus was on the portion of the published fee that payment companies could ultimately retain.
Competition for merchants could put pressure on realised rates, particularly if rival platforms chose to compete more aggressively.
“Slippage between published and earned take-rates becomes the key risk,” Bernstein said.
Earnings outlook may improve sharply by FY30
Bernstein’s revised model puts FY30E earnings per share at Rs 106. The brokerage estimated that the UPI MDR assumption would increase its FY30E earnings-per-share forecast by around 30% compared with its previous estimate.
| Paytm EPS estimates | FY27 | FY28 | FY30 |
| Revised | Rs 23.19 | Rs 57.84 | Rs 106 |
| Previous | Rs 24.32 | Rs 42.50 | Not provided |
Source: Bernstein estimates.
Conclusion
The investment case now rests on whether UPI transactions can be monetised at the level assumed by Bernstein. The brokerage expects the potential benefit to begin from FY28E, with the eventual impact depending on the scope of eligible transactions and the share of MDR Paytm is able to retain.
For Paytm, the potential return of UPI MDR could therefore turn one of its largest transaction platforms into a more meaningful contributor to payments profitability.
Disclaimer: The investment ratings, price targets, and financial projections mentioned in this report are derived from third-party brokerage research and are provided solely for informational and educational purposes. They do not constitute an offer, solicitation, or direct recommendation to buy, sell, or hold securities of One97 Communications (Paytm). Equity market investments are subject to market risks, and forward-looking estimates or brokerage targets carry no guarantee of future returns. Readers should conduct independent due diligence and consult a SEBI-registered financial advisor before making any investment decisions.
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