Paytm shares nosedive 10% after FinMin refutes reports of MDR charges on UPI transactions

Shares of Paytm parent One 97 Communications crashed 10% in early trade on Thursday as the sentiment was dented after the Union finance ministry clarified that there would be no merchant discount rate (MDR) on unified payments interface (UPI) transactions. The MDR is the fee merchants pay to banks or payment service providers for processing digital transactions like credit and debit card payments, as well as UPI. Since January 2020, the government has maintained a zero-MDR policy for UPI and RuPay debit card transactions to boost digital payments.

Reacting to the news, Paytm shares declined as much as 10% to ₹864.20 on the BSE, registering its biggest single-day fall since February 2024. Paring some of the early losses, the fintech heavyweight was trading 7.5% lower at ₹888, with its market capitalisation sliding by ₹4,606 crore to ₹56,646 crore from ₹61,252 crore at Wednesday's close. The counter saw strong trading volume as 370,000 shares changed hands on the BSE as compared to a two-week average of 277,000 stocks.

On Wednesday, after the markets closed, the finance ministry had refuted reports suggesting that the government was considering levying charges on UPI transactions.

Paytm, being a major player in the UPI ecosystem, is sensitive to any policy changes related to transaction fees. The company's profitability and revenue models are partly tied to the broader digital payments landscape. The initial reports of potential MDR charges had likely fuelled investor optimism about increased monetisation opportunities for payment facilitators. However, the refusal has dampened this sentiment, leading to the fall in Paytm's share price.

In FY25, Paytm's revenue from UPI reportedly fell to ₹70 crore from ₹290 crore in FY24. 

Emkay Global, in a report, said that Ebitda before ESOP cost for the March quarter of FY25 was ₹81 crore, a decline of 21% year-on-year from ₹102 crore, due to lower UPI incentive, which coupled with accelerated cost (₹490 crore) on ESOPs surrendered by MD & CEO Vijay Sharma and impairment in subsidiary-led entities, led to a net loss of ₹610 crore.

“Additionally, potential re-introduction of MDR on high-value UPI transactions and receipt of payment aggregator and wallet licence (either its own or on rent) should further boost its revenue/profitability and act as a stock catalyst,” the brokerage said in a recent report.

FinMin refutes reports of MDR charges on UPI transactions

The finance ministry on Wednesday said that "speculation and claims that the MDR will be charged on UPI transactions are completely false, baseless, and misleading".

“Such baseless and sensation-creating speculations cause needless uncertainty, fear and suspicion among our citizens,” the ministry said in an official post on social media platform X.  “The Government remains fully committed to promoting digital payments via UPI,” it added.

The FinMin issued this clarification after some media reports claimed that the government was mulling the option of imposing MDR on high-value UPI transactions, specifically those exceeding ₹3,000.

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