UPI MDR sends shares of Paytm, MobiKwik, Pine Labs higher: Is it time to buy?

Shares of Paytm, One MobiKwik Systems and Pine Labs rose sharply on Wednesday after the introduction of a 0.4% Merchant Discount Rate (MDR) on select UPI merchant transactions above Rs 2,000 opened the door to a new revenue stream for payment companies.

Paytm rose as much as 7% to Rs 1,855.50 in early trade, hitting a fresh 52-week high, while MobiKwik gained around 5-6%. Pine Labs also rose initially before giving up some of its gains. Reuters reported that Paytm, MobiKwik, Yes Bank and Axis Bank gained between 2% and 8% in early trade, while Pine Labs, after rising about 2.2%, later turned lower.

The rally came after the National Payments Corporation of India announced that a 0.4% MDR will apply to eligible person-to-merchant UPI transactions above Rs 2,000 from October 15. The charge will be capped at Rs 300 for transactions of Rs 75,000 and above.

For investors, the key change is that UPI acquiring, which has operated under a zero-MDR regime, will now have a transaction-linked revenue model. Brokerages believe this could materially improve the earnings outlook for some payment companies.

The biggest reason for the market reaction is simple: payment companies could finally monetise a part of the UPI merchant business that previously generated little or no direct transaction revenue.

Emkay Global Research said the new framework is likely to benefit Paytm and Pine Labs and retained its 'Buy' calls on both stocks. It raised its target prices to Rs 2,400 for Paytm and Rs 230 for Pine Labs.

The brokerage estimates Paytm could generate Rs 1,120 crore in UPI MDR revenue in FY28, while Pine Labs could generate Rs 155 crore. It described the new model as a recurring revenue stream that could make the payments business more self-sustaining.

JM Financial was also positive on Paytm. It raised its target price to Rs 2,150 from Rs 1,950 while retaining its 'Buy' rating. The brokerage said the notified 40 basis points MDR was higher than the 25 basis points it had previously modelled, although broader exemptions meant it reduced its estimate of eligible transaction value.

JM Financial estimates the new MDR could generate incremental revenue of Rs 210 crore for Paytm in FY27 and Rs 470 crore in FY28. It also expects a substantial portion of the incremental revenue to flow through to EBITDA.

Jefferies has also raised its Paytm target price to Rs 2,100 from Rs 1,600 while retaining its 'Buy' rating. It highlighted Paytm's large merchant base and said the shift away from zero MDR could improve monetisation of its existing customer base.HOW MUCH MONEY COULD THE UPI MDR GENERATE?

The potential revenue pool is significant because UPI has become one of India's largest payment networks.

Bernstein estimates banks could receive around Rs 14,000 crore from the new pool, while payment apps could receive around Rs 7,000 crore and the network around Rs 1,000 crore.

Citi has estimated that the banking ecosystem could gain around Rs 16,000-17,000 crore in annual revenue from the new framework, Reuters reported.

However, the entire UPI ecosystem will not suddenly become chargeable.

Person-to-person transactions remain free, while payments up to Rs 2,000 remain outside the new MDR framework. Small merchants covered by the P2PM framework are also exempt. The government says around 96% of P2M transactions will remain unaffected.

This means the revenue opportunity depends on how much of the eligible high-value merchant transaction pool each payment company can actually capture.PAYTM HAS THE CLEAREST EARNINGS TRIGGER

Among the payment companies, Paytm has emerged as the clearest beneficiary in brokerage estimates.

The company has a large merchant base, and the new MDR creates a way to monetise high-value merchant transactions that previously generated no transaction revenue.

Bernstein has estimated Paytm's EPS could reach Rs 78 by FY29 and set a target price of Rs 2,200. Even without factoring in the potential UPI MDR benefit, its FY29 EPS estimate stands at Rs 54, compared with a consensus estimate of Rs 46.

Jefferies, meanwhile, expects Paytm's merchant lending and other businesses, along with operational improvements, to support revenue growth over FY26-29. It also factored in the new MDR while raising its earnings estimates for FY28-29.

The new MDR does not automatically mean that every payment company will receive 0.4%.

The final distribution of the MDR pool across acquiring banks, payment service providers, apps and other participants will determine how much ultimately reaches each company.

JM Financial specifically flagged this as a key risk, noting that NPCI had not yet specified how the MDR pool would be distributed across the value chain.

That matters because the headline 0.4% rate is not the same as the revenue that will accrue to Paytm, MobiKwik or Pine Labs.

The size of the eligible transaction base, the company's share of that volume and the eventual revenue split will all determine the actual earnings impact.

Brokerages have clearly turned more positive on the payment companies following the MDR announcement, particularly Paytm and Pine Labs.

Emkay has retained 'Buy' ratings on both Paytm and Pine Labs, with target prices of Rs 2,400 and Rs 230 respectively. JM Financial and Jefferies have also retained 'Buy' ratings on Paytm while raising their target prices to Rs 2,150 and Rs 2,100 respectively. Bernstein has named Paytm its top pick and assigned a Rs 2,200 target.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)- EndsPublished By: Sonu VivekPublished On: Sep 16, 2026 13:20 IST