Paytm shares soar 9% due to MDR buzz; hits 52-week high

Paytm shares surged nearly 9% in today's trading session, after investors took encouragement from a proposed amendment to rules governing merchant discount rates (MDR) on digital payments. The stock rose 8.7% to ₹1,567, at the time of reporting. The stock also hit a 52-week high of ₹1580.

The immediate trigger was investor optimism around a proposed amendment to Section 10A of the Payments and Settlement Systems (PSS) Act. The provision currently prevents banks and payment service providers from charging MDR on notified payment modes such as UPI and RuPay debit cards.

The proposed amendment, however, does not immediately bring back MDR on UPI transactions. Instead, it seeks to remove the blanket statutory exemption and give the Central government the power to decide through future notifications which digital payment modes will continue to have zero MDR and which could attract merchant charges.

For Paytm, investors see this as a potential long-term positive because MDR could eventually provide payment companies with another source of revenue. At present, UPI transactions do not generate MDR income, forcing payment platforms to monetise their large user and merchant bases through lending, subscriptions, financial services and device rentals.

According to media reports, Bernstein in its report stated that MDR could lift Paytm's net payments margins by three to four basis points, driving a 30% increase in its Earnings per Share (EPS) for financial year 2030 in comparison to the previous forecasts. "So, competitive intensity in merchant acquiring could increase further, as a result, realised economics could prove to be lower than published rates," Bernstein wrote in its note.

Motilal Oswal, in its latest research report, also highlighted improving payment processing margins as a positive for Paytm. The brokerage said payment processing margin (PPM) improved to 4 basis points from 3 basis points earlier, helped by a higher mix of profitable MDR-bearing instruments such as credit cards on UPI and postpaid/EMI transactions.

Paytm posts 28% revenue growth in Q1

One 97 Communications reported a 28% year-on-year increase in revenue from operations to ₹2,450 crore in the June quarter, while profit after tax stood at ₹220 crore.

Gross merchandise value (GMV) grew 31% year-on-year and 9% sequentially, helped by growth in offline merchant digitisation and online payments. Financial services revenue rose 45% year-on-year and 9% quarter-on-quarter, supported by growth in the merchant base and a higher share of repeat borrowers.

Net payment margin increased 13% year-on-year to ₹600 crore, although the margin as a percentage of GMV declined to 8 basis points from 9 basis points in the previous quarter.

Paytm’s EBITDA margin improved to 8.3% in Q1FY27 from 5.8% in Q4FY26, as indirect expenses declined. The company expects margins to improve further through operating leverage, lower indirect costs and AI-led efficiency gains. The number of registered merchants rose 11% year-on-year to 5 crores, while payment devices increased 21% to 1.57 crore.