Shares of One 97 Communications Ltd, the parent company behind fintech platform Paytm, experienced a significant rally on Monday, jumping nearly 9% to reach a 52-week high of Rs 1,568.75. This surge pushed the company's market capitalization past the Rs 1 lakh crore mark.
Bernstein's Bullish Outlook on Paytm Stock
The sharp rise in Paytm's stock price followed an announcement from overseas brokerage firm Bernstein, which raised its target price for the company to Rs 2,200. This marks the first time since Paytm's listing five years ago that a brokerage has set a target price exceeding its initial public offering (IPO) issue price of Rs 2,150. Bernstein has maintained its 'outperform' rating on the stock, suggesting a substantial 53% upside potential from the previous closing price.
UPI Monetization: A Key Growth Driver
Bernstein's revised target price is primarily driven by the incorporation of merchant discount rate (MDR) introduction on UPI transactions into its base case from fiscal year 2028 onwards. The brokerage anticipates that MDR could boost net payments margins by 3-4 basis points, potentially increasing Paytm's FY30E Earnings Per Share (EPS) by 30%.
"We are incorporating the merchant discount rate (MDR) introduction on UPI transactions into our base case from FY28E onwards. We think MDR could lift net payments margins by 3-4 bps, driving a 30 per cent increase in FY30E EPS," Bernstein stated in its recent report.
This shift in outlook comes after recent commentary from the Ministry of Finance and legislative changes that removed the statutory prohibition on charging MDR for UPI transactions. Bernstein noted that the debate has moved from if MDR will return to when and in what form. The brokerage now includes UPI monetization in its base-case forecasts, phasing in benefits from FY28E.
Projected Impact and Technical Analysis
Given the highly concentrated nature of UPI transaction values, Bernstein estimates that even a narrow charging perimeter could capture a meaningful share of payment value. The firm projects that MDR will apply to 50% of transaction value, enabling Paytm to realize 3-4 bps of incremental net payments margin, translating to an estimated Rs 2,200 crore of incremental EBITDA by FY30E.
From a technical perspective, Axis Direct also highlighted Paytm as a top pick. The stock demonstrated a decisive breakout above a rounded-bottom pattern on the weekly chart, supported by a strong bullish candle, signaling the start of a medium-term uptrend. Axis Direct observed a consistent higher high–higher low pattern, reinforcing the positive trend and indicating sustained buying interest. The weekly Relative Strength Index (RSI) also confirmed a buy signal, breaking above its downward-sloping trendline near the 60 mark.
Historical Context of Paytm's Journey
Paytm was listed on Indian bourses in November 2021, raising Rs 18,300 crore through its IPO with a price band of Rs 2,080-2,150. After its listing, the stock faced significant challenges, tumbling below the Rs 300 level by February 2024. However, the stock has shown considerable recovery, gaining 66% from its 52-week low of Rs 947.10 hit on March 30, and is up 40% over the last year, with a 17% gain in the last month alone.