Paytm shares in focus after Finance Ministry clarifies on MDR, analysts warn of earnings impact

The Finance Ministry has dismissed reports about the possible introduction of a merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions, according to an official statement. This clarification comes after several media articles said that MDR charges could be reintroduced.

This development is particularly relevant for Paytm, Morgan Stanley said in its report.

"Our adjusted EBITDA estimates for Paytm are above consensus, based on the assumption that the UPI take rate reverts to FY24 levels (2 basis points)," the brokerage said.

Further, Morgan Stanley mentioned that the government discontinued UPI incentives for the industry in FY25. For Paytm specifically, the incentive was cut to ₹70 crore from ₹290 crore in FY24. "If the media reports are accurate, there could be downside risk to our medium-term estimates," it added.

Meanwhile, UBS has a 'Neutral' rating on One97 Communications, with a price target of ₹1,000 per share.

In a post on X, the Finance Ministry reiterated that it has not introduced any MDR on UPI transactions, refuting the ongoing speculation.

The delay or non-introduction of MDR is sentimentally negative for Paytm, the brokerage said.

UBS added: "We build in a 1 bp contribution to Paytm's net payment margin from either the introduction of MDR or increased incentives versus the Budget. Absent both, our FY26/27E adjusted EBITDA estimates face a downside risk of over 10%."

Shares of One 97 Communications Ltd. settled 0.18% lower on Wednesday at Rs 959.55. The stock has risen 11% in the last one month.

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