Paytm shares upgraded, Pine Labs target raised by JPMorgan after MDR decision

Shares of One97 Communications Ltd., the parent company of Paytm, and Pine Labs opened with gains of up to 1% on Friday, September 18, after global brokerage firm JPMorgan shared a note on FinTech's.

Paytm shares have been upgraded to 'Overweight' by JPMorgan. The brokerage has also raised its price target to ₹2,100, citing the potential impact of UPI merchant discount rate (MDR) revenues on fintech companies.

JPMorgan estimates that the UPI MDR could create an industry revenue pool of around ₹17,000 crore on a run-rate basis for FY27. Of this, the brokerage expects 20-30% each to accrue to acquiring banks and their payment aggregators (PAs), as well as third-party application providers (TPAPs).

Paytm operates as both a TPAP and an acquiring PA, giving it exposure across both transaction legs. JPMorgan estimates that factoring in MDR revenues across both legs could result in a 35-54% upgrade to its EBITDA and earnings per share (EPS) estimates for FY27-29E.

The brokerage has also raised its target price-to-earnings (P/E) multiple for Paytm to 46 times from 44 times.

JPMorgan has retained its 'Neutral' recommendation on Pine Labs, while raising its price target to ₹190.

The brokerage estimates that MDR-related benefits could drive a 9-28% upgrade to Pine Labs' EBITDA and EPS estimates for FY27-29E.

JPMorgan has increased its target P/E multiple for Pine Labs to 42 times from 40 times.

Note To Readers

Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.