Paytm Shares Surge 5% as Bernstein Sets First Target Above IPO Price at Rs 2,200
Key Takeaways
- •Bernstein raised its target price on One97 Communications to Rs 2,200 and maintained an Outperform rating.
- •The new target is the highest among analysts covering Paytm and is above its Rs 2,150 IPO price.
- •Bernstein expects Paytm could start earning Merchant Discount Rate revenue on UPI transactions in FY28.
- •Paytm shares rose about 5% after the target price revision.
- •Investors are also assessing Paytm’s revenue diversification into financial services distribution alongside its core payments business.
Shares of One97 Communications, the parent company of Paytm, rose approximately 5% after brokerage firm Bernstein raised its target price on the stock to Rs 2,200 — the highest target among Wall Street and domestic analysts covering the company, and the first such target to exceed Paytm's Rs 2,150 initial public offering (IPO) price.
Bernstein retained its "Outperform" rating on the stock. The revised target price of Rs 2,200 implies a 52% upside from prevailing levels, according to the brokerage's note.
A key driver behind Bernstein's upward revision is its expectation that Paytm could begin generating revenue from the Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions starting in fiscal year 2028 (FY28). India's UPI has grown into one of the world's largest real-time payment systems, processing billions of transactions monthly. The government and the Reserve Bank of India currently do not permit MDR charges on UPI transactions, but industry discussions about potential monetization frameworks have been ongoing. Any policy shift on UPI MDR would carry broad implications across India's digital payments ecosystem, where players like PhonePe and Google Pay also dominate transaction volumes.
The Rs 2,200 target marks a milestone for Paytm, which listed on Indian stock exchanges in November 2021 at an issue price of Rs 2,150 per share. The stock has traded below its IPO price for most of its public-market history, affected by regulatory actions, including restrictions imposed by the Reserve Bank of India on Paytm Payments Bank in early 2024. Following those restrictions, Paytm transitioned its payment operations to partner banks such as Axis Bank and Yes Bank, allowing its core app services to continue functioning while it wound down Paytm Payments Bank's activities.
The rally in Paytm shares also follows the company's Q1 results, as investors assess the trajectory of its revenue diversification into financial services distribution, including loan facilitation and insurance, alongside its core payments business. (Source: Economic Times Markets)
