Fintech Stocks Rally On Report Of 40 Basis Point MDR On UPI, Paytm Touches 52-Week High

Fintech company stocks, including Paytm, Pine Labs, Mobikwik, and AvenuesAI, experienced a significant rally on the news of a potential 40 basis point merchant discount rate (MDR) for UPI transactions. Pine Labs saw the highest jump, rising 16.9% to close at ₹202.35, while Mobikwik climbed 8.1% to ₹209.80, and AvenuesAI increased 6.1% to ₹16.31. Paytm, meanwhile, ended the day's trading session 3.9% higher at ₹1,806.25, reaching a fresh all-time high of ₹1,829.50 during intraday trade.

The rally was sparked by reports that MDR fees on UPI payments may be set at around 40 basis points (0.4%) of the transaction value. This proposal came a month after the Centre amended the Payment and Settlement Systems Act (PSSA), 2007, to remove a ban on banks and system providers charging fees on UPI payments. MDR is expected to apply only to P2M transactions, excluding P2P transactions, and would be subject to a turnover-based threshold for merchants with an annual turnover of around ₹1 Cr-₹1.5 Cr or more. A differential fee structure could apply across sectors, according to an Economic Times report.

The news of the potential MDR has unlocked an estimated revenue stream of ₹5,000-10,000 Cr for payments platforms like the four mentioned companies. Jefferies estimated that the proposal could generate a revenue pool of this size by FY28, based on a 25% compound annual growth rate (CAGR) in the value of P2M transactions over FY26-28.

Paytm's FY28 EBITDA and profit could grow 15-35%, while Pine Labs' could surge 9-23% in this scenario, according to Jefferies' calculations. Bernstein previously projected that Paytm could add ₹1,320 Cr to its EBITDA under a 35 basis point MDR on a subset of UPI transactions, estimating a potential ₹2,200 Cr in incremental EBITDA by FY30.

However, concerns remain about potential slippage between the notified MDR rate and the actual take-rate if competition intensifies among payments platforms.