3 weeks ago
UPI MDR return could boost Paytm, Pine Labs earnings
In India, people use a payment system called UPI to send money using their phones.
Right now, shops do not have to pay a fee when customers pay them with UPI.
The government is thinking about a new rule that could let banks charge shops a small fee, called MDR, for bigger UPI payments.
If this happens, payment companies could earn more money.
Two big payment companies are Paytm and Pine Labs.
A financial research company called Jefferies thinks Paytm could earn an extra Rs 300 crore to Rs 730 crore every year.
Jefferies thinks Pine Labs could earn an extra Rs 50 crore to Rs 150 crore.
Both companies already did very well in the last quarter and made a profit.
Paytm's profit before interest and taxes grew a lot compared to last year.
The final decision still depends on the Reserve Bank of India and NPCI, so nothing is guaranteed yet.
If the fee returns, it could give both companies an extra boost along with their own growth plans.
A proposed amendment to the Payment and Settlement Systems Act has put UPI merchant discount rate (MDR) back in focus.
Jefferies estimates MDR on merchant UPI transactions above Rs 2,000 could create an industry revenue pool of Rs 5,000 crore to Rs 10,000 crore by FY28.
Jefferies expects Paytm to be the larger beneficiary, with Rs 300 crore to Rs 730 crore in incremental revenue and FY28 EBITDA and profit up 15% to 35%.
Pine Labs could add Rs 50 crore to Rs 150 crore in revenue, lifting FY28 EBIT by 10% to 23% and profit after tax by 9% to 21%.
Both companies posted strong Q1 FY27 results: Paytm's EBITDA rose 182% YoY to Rs 203 crore, while Pine Labs reported around 20% revenue growth and roughly Rs 20 crore in profit after tax.
- Who
- Paytm (One97 Communications) and Pine Labs, two Indian fintech companies, along with brokerage Jefferies and regulators the Reserve Bank of India and NPCI.
- What
- A proposed amendment to the Payment and Settlement Systems Act could bring back UPI merchant discount rate (MDR), which Jefferies says would boost revenue and profits for Paytm and Pine Labs.
- Where
- India.
- When
- Q1 FY27 (June quarter) results were analyzed, with Jefferies' MDR revenue projections targeting FY28.
- Why
- Charging MDR on merchant UPI transactions above Rs 2,000 could create a new revenue pool of Rs 5,000 crore to Rs 10,000 crore by FY28 for payment companies.
Paytm better positioned for MDR
Pine Labs a positive beneficiary
Which company gains more from UPI MDR
Paytm better positioned for MDR
Jefferies believes Paytm is better placed because of its larger merchant acquiring business, estimating Rs 300 crore to Rs 730 crore in incremental revenue and a 15% to 35% lift to FY28 EBITDA and profit.
Pine Labs a positive beneficiary
Pine Labs is still seen as a positive beneficiary, with Rs 50 crore to Rs 150 crore in incremental revenue, FY28 EBIT up 10% to 23% and profit after tax up 9% to 21%, with benefits depending on the final MDR structure.
Key facts
- Companies compared
- Paytm vs Pine Labs
- Estimated MDR industry revenue pool
- Rs 5,000 crore to Rs 10,000 crore by FY28 (Jefferies)
- Jefferies' incremental revenue estimate - Paytm
- Rs 300 crore to Rs 730 crore
- Jefferies' incremental revenue estimate - Pine Labs
- Rs 50 crore to Rs 150 crore
- Paytm Q1 FY27 revenue
- Rs 2,448 crore, up 28% YoY
- Paytm Q1 FY27 EBITDA
- Rs 203 crore, up 182% YoY
- Pine Labs Q1 FY27 profit after tax
- Around Rs 20 crore
- Share price performance (past 1 year)
- Paytm +37.06%; Pine Labs -37.91%
Quotes
Vijay Shekhar Sharma
Founder and Chief Executive Officer, Paytm
“The revenue growth acceleration and the fact that indirect expenses are growing significantly slower than revenue growth… AI structurally not only accelerates operating leverage, it also expands the opportunity for higher margins over time because you’re just able to do more with less.”
financialexpress.com
“We have gone ahead and front‑loaded our investments in sales people, telecom infrastructure, network infrastructure and also some cloud capabilities. That has impacted our EBITDA slightly.”
financialexpress.com
Sources
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