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Fintech company stocks — Paytm, Pine Labs, Mobikwik and AvenuesAI — rallied today amid reports suggesting that the merchant discount rate (MDR) fees on UPI transactions could soon be notified. Pine Labs’ stock surged the most, jumping 16.9% to close the day at ₹202.35 on the BSE. Mobikwik climbed just over 8% to close at ₹209.80, while AvenuesAI jumped 6.1% to ₹16.31. Meanwhile, shares of Paytm ended today’s trading session 3.9% higher at ₹1,806.25. The stock jumped as much as 5.2% during intraday trade to touch a fresh all-time high of ₹1,829.50. The rally came after reports earlier in the day suggested that MDR fees on UPI payments are likely to be set at around 40 basis points (bps), or 0.4%, of the transaction value. This comes around a month after the Centre amended the Payment and Settlement Systems Act (PSSA), 2007, to remove a blanket prohibition barring banks and system providers from charging fees on UPI payments. MDR is likely to be charged on P2M transactions only and exclude P2P transactions, with a turnover-based threshold to ensure that only merchants with an annual turnover of around ₹1 Cr-₹1.5 Cr or more. There may be differential fees for businesses across sectors, as was earlier reported. Third-party application providers (TPAPs) – UPI apps – would receive roughly 30% of the MDR, or 12 bps of the transaction value, as per an Economic Times report earlier today. The proposal would unlock a revenue stream of around ₹5,000-10,000 Cr for payments platforms like the four aforementioned companies, brokerage Jefferies had said earlier in a research note. It must be noted that the brokerage firm had estimated a slightly lower MDR of 15-30 bps on transactions above ₹2,000 in its calculations. “Assuming 25% CAGR in value of P2M over FY26-28, we estimate the revenue pool could be about ₹5,000-10,000 Cr in FY28 (estimated),” said Jefferies. As a result, Paytm’s FY28 EBITDA and profit could grow around 15-35% while Pine Labs’ FY28 EBIT and profit could jump 9-23% in this scenario, per the brokerage’s estimates. Another brokerage, Bernstein, had previously projected that Paytm could add ₹1,320 Cr to its EBITDA in the case of 35 bps MDR on a subset of UPI transactions. “We estimate MDR will apply to~50% of transaction value and that Paytm can realise ~3-4bps of incremental net payments margin, translating into ₹2,200 Cr of incremental EBITDA by FY30 (estimated),” it noted. However, Jefferies had raised a question around slippage between the notified MDR rate and the earned take-rate in the event that competition to onboard merchants intensified among payments platforms.
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