Jefferies estimates MDR could increase Paytm’s FY28 EBITDA and profit by 15 per cent to 35 per cent, while Pine Labs’ EBITDA could rise by 10-23 per cent, depending on the final framework.
Share price of payment aggregators/fintech companies including Paytm, Mobikwik, Pine Labs gained sharply on Monday as analysts raised the target price of these companies expecting the proposed introduction of Merchant Discount Rate (MDR) charges on large UPI merchant transactions could boost their profitability.
Shares of One97 Communications, the parent company of digital payments major Paytm rose 9.88 per cent to close at Rs 1584.10 on NSE after hitting 52 week high in intraday trade of Rs1598.50 after global brokerage Bernstein maintained its outperform rating on the company and raise its price target to Rs 2200 from Rs 1500.
Bernstein in its report said that the proposed MDR fee could lift Paytm’s net payment margins by 3 4 basis points which could drive a 30 per cent increase in the company’s earnings per share for FY30 compared to its previous forecasts. The market cap of One97Communications crossed Rs one lakh crore mark and stood at Rs 101561.90 crore at market close.
Similarly, other payment companies also gained with Pine Labs shares closing 4.90 per cent up at Rs 162.01 and One Mobikwik Systems gained 3.49 per cent to close at Rs 207.30.
Jefferies estimates MDR could increase Paytm’s FY28 EBITDA and profit by 15 per cent to 35 per cent, while Pine Labs’ EBITDA could rise by 10-23 per cent, depending on the final framework.
Experts said that the proposed UPI monetisation will boost the profit margins of other payment aggregators too including PhonePe, GooglePay, BharatPe, RazorPay and PayU.
“Our base case assumes a headline MDR of around 35 basis points applicable only to a subset of UPI Payment to Merchant transactions. Given the highly skewed nature of UPI transaction values, even a narrow charging perimeter can capture a meaningful share of payment value. We estimate MDR will apply to around 50 per cent of transaction value and that Paytm can realise 3-4 basis of incremental net payments margin translating into around Rs 2200 crore of incremental EBITDA by FY30 estimates,” said the Bernstein report.
