Paytm shares hit 52-week high; brokerage expects stock to cross IPO price 

Shares of One 97 Communications Ltd, the parent company of fintech major Paytm, hit a 52 week high for the second session this week. In the current session, the stock hit a 52-week high of Rs 1829.50, rising 5.2% intra day. Market cap of the fintech firm rose to Rs 1.16 lakh crore. In the previous session too, the stock hit a 52 week high of Rs 1756.

The rally in the Paytm stock comes as global brokerage Bernstein named the stock its top pick, assigning a price target of Rs 2,200. The target price exceeds the IPO price by Rs 50. IPO price of Paytm stood at Rs 2,150 nearly five years ago when it opened for subscription in November. Bernstein cited robust merchant lending growth, operating leverage and the potential introduction of Merchant Discount Rate (MDR) on UPI as key drivers of earnings growth.

Bernstein expects Paytm’s EPS to reach Rs 78 by FY29. Even after excluding any potential impact from MDR on UPI, its FY29E EPS estimate stands at Rs 54, still above the Rs 46 consensus estimate.

Bernstein has also maintained a positive outlook on Paytm’s earnings trajectory. The brokerage expects the company’s earnings per share (EPS) to rise to Rs 78 by FY29.

Importantly, even after factoring out any potential contribution from UPI MDR, Bernstein estimates Paytm’s FY29 EPS at Rs 54. This remains comfortably ahead of the Rs 46 consensus estimate, indicating the brokerage sees further scope for earnings to outperform current market expectations.

According to an Economic Times report, the government may issue a notification on merchant discount rates in the coming weeks. MDR may be fixed at 40 basis points, with payment providers and acquiring banks getting share of 30% each and issuing banks 40%.

Another global brokerage Jefferies raised its price target to Rs 2100 from Rs 1600 earlier.

Jefferies believes Paytm is well positioned to capitalise on its large customer base, highlighting the company’s ability to generate revenue even under the near-zero merchant discount rate (MDR) environment. The brokerage expects the backdrop to improve as the MDR framework for UPI evolves in a more favourable direction.

The brokerage raised its earnings estimates for financial years 2028 and 2029 by 20% and 25%, respectively, considering a 25-basis-point MDR on UPI transactions.