Bernstein raises target price for One97 Communications amid speculation that India may reintroduce merchant discounts on UPI transactions, potentially boosting Paytm’s revenue streams and margins by FY30.
Bernstein has turned more positive on One97 Communications, the parent of Paytm, lifting its target price to Rs2,200 from Rs1,500 and keeping an “Outperform” rating. The brokerage is betting that a possible change in India’s digital payments policy could open a new earnings stream for payment companies over time, rather than relying only on current-quarter performance.
The shift in focus is the merchant discount rate, or MDR, the fee paid by merchants for digital payments. UPI transactions have been free for merchants since the levy was scrapped in January 2020, but recent reporting in Mint, the Economic Times, Financial Express, Moneycontrol and Outlook Business suggests the government is considering bringing back a modest charge for large merchants. Those reports say small merchants and person-to-person transfers would remain exempt, while any levy would likely be capped at 0.5% and may apply only above certain thresholds.
According to Bernstein, that policy change could matter meaningfully for Paytm’s economics. The brokerage has raised its FY30 earnings-per-share estimate to Rs106 and says it now assumes a headline MDR of about 35 basis points on a slice of person-to-merchant UPI payments from FY28 onwards. On its model, around half of UPI value could fall into the chargeable pool, adding roughly 3 to 4 basis points to Paytm’s net payments margin and about Rs2,200 crore in incremental EBITDA by FY30.
Still, the case is far from settled. The Finance Ministry has previously rejected speculation about a return of UPI MDR, calling such claims false and misleading, so any policy shift would represent a major change in position. Bernstein also flagged a practical risk: payment firms may not keep the full rate on paper if competition intensifies and providers cut fees to protect merchant relationships, which could leave realised margins below headline assumptions.
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