Paytm, Mobikwik rally up to 7% as NPCI levies charge on UPI transactions
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Digital payments platforms like Paytm and Mobikwik saw a sharp rally of up to 7 per cent in intraday deals on Wednesday, as the introduction of a merchant discount rate (MDR) on UPI transactions is seen as making the payment business structurally self-sustaining and resilient.
Paytm shares rallied 7 per cent to a fresh 52-week high of ₹1,856.50 on the BSE. Mobikwik stock rose by 6 per cent to ₹214. However, Pine Labs slumped 6 per cent to ₹182 per share.
Effective from October 15, the National Payments Corporation of India (NPCI), which operates UPI, said a MDR of 0.4 per cent would apply to person-to-merchant UPI transactions above ₹2,000. The fee will be capped at ₹300 for transactions of ₹75,000 or more.
Person-to-merchant (P2M) transactions up to ₹2,000 will remain free of MDR. Peer-to-peer (P2P) transactions, such as transfers between family and friends, will also remain free.
Payments to small vendors, classified as P2PM, will also remain free of any MDR. P2PM merchants are small vendors receiving up to ₹1 lakh a month through UPI, a category that particularly benefits businesses in rural and semi-urban areas. READ MORE
Jefferies said the levy is higher than expectation of 25 bps and lifts revenue pool for industry to help expand the market and drive growth.
The more important signal, Emkay Global said, is that UPI now carries a commercial revenue model that is contractual, recurring, and scales with value, in place of a discretionary annual subsidy. "This will make the payment business structurally self-sustaining, making the business model much more resilient."
How will MDR impact Paytm, Pine Labs?
On conservative assumptions, i.e. 10 bps and 6 bps realized take-rates for Paytm and Pine Labs, respectively Emkay estimates FY28 UPI MDR revenue of ₹11.2 billion and ₹1.55 billion, respectively.
The present value of this stream adds ₹434 billion and ₹51.2 billion to its valuations for Paytm and Pine Labs. As a result, Emkay raised Paytm's target price to ₹2,400 and Pine Labs' to ₹230.
Jefferies also followed suit and marginally raised Paytm's target price to 2,150 from 2,100 as the 0.40 per cent charge (as against 0.25 per cent expected) is likely to add 10-12 per cent to FY28-29 earnings.
It further said that Pine Labs' merchant acquiring and payment acceptance franchise positions it to benefit from MDR on eligible UPI transactions. "Based on our estimates, the framework could create an incremental revenue opportunity of ₹1.6 billion by FY28e, equivalent to roughly 20 per cent of our FY28e EBIT & PAT estimates," Jefferies said, raising the target to ₹235 from ₹180 earlier.
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