Paytm karo, back in vogue again: Can the stock reclaim IPO price after 5 years and 480% rally?

Paytm investors have been waiting for one question to be answered: when will the stock finally reclaim its IPO price? Shares of Paytm-parent One 97 Communications are currently 20% below the issue price of Rs 2,150, the level at which the offer was launched back in 2021.

The stock, however, has come a long way from its lows. Paytm shares have recovered more than 480% from their lifetime low of Rs 310 over the past two years, even as they remain below their IPO price.

Paytm’s journey since its market debut has been anything but smooth. In 2024, the Reserve Bank of India (RBI) directed Paytm Payments Bank to cease all deposits and credit transactions after February 29, 2024. The action stemmed from persistent non-compliances and ongoing supervisory concerns within the bank, raising questions about the impact on its customers. The stock subsequently plunged to an all-time low.


Fast forward to 2026, and Paytm shares have staged a strong recovery, rising 75% in the last six months and about 40% since the beginning of the year. The rally could now get an additional boost from the government’s decision to introduce minimum discount rates (MDR) for UPI charges.

That brings the long-standing question back into focus: could UPI MDR charges provide the next push for Paytm shares to finally reclaim their IPO price after five years?

What are the new charges?

The government has announced the first-ever Merchant Discount Rate on select UPI transactions above Rs 2,000.

The National Payments Corporation of India (NPCI) on Tuesday announced that the government will introduce MDR on some Person-to-Merchant (P2M) UPI transactions from October 15 onwards. Merchants will pay 0.4% on transactions above Rs 2,000, while the maximum fee that can be levied will be Rs 300 for payments of Rs 75,000 or more.

The crucial point for consumers is that they will not be charged for making UPI payments. Person-to-Person (P2P) transfers will also remain free. Small merchants classified under the P2PM framework will continue to be protected from MDR. This includes vendors receiving up to Rs 1 lakh a month through UPI QR codes.

For most everyday UPI users, another important threshold is Rs 2,000. Transactions worth up to Rs 2,000 will continue to carry zero charges and account for more than 95% of UPI’s P2M transaction volume, according to the FAQ released by the government.

Paytm poised for big gains?

Paytm is poised to become early beneficiaries of the government’s decision to monetise high-value UPI payments, although the new revenue stream could have very different implications for the two fintech companies.

Paytm is positioned to capture the larger absolute opportunity, with analysts estimating FY28 UPI MDR revenue of as much as Rs 1,160 crore.

The high-value segment is financially significant. Transactions above Rs 2,000 accounted for just 4% of P2M transaction volumes in July, but represented 68% of transaction value, according to JM Financial. Jefferies puts the corresponding share at 67% for FY26.

That creates a potentially sizeable revenue pool. Jefferies estimates the industry opportunity at Rs 15,000 crore to Rs 18,000 crore, to be shared among issuing banks, acquiring banks, payment apps and other participants in the UPI ecosystem.

The reports indicate that the 40 basis points could be distributed indicatively as 16 basis points to the issuing bank, 12 basis points to the acquiring bank, 8 basis points to the payer’s technology provider, or TPAP, and 4 basis points to the payer’s PSP bank. The final sharing formula, however, has not yet been specified by NPCI.

Paytm’s base case assumes it retains about 20% of the MDR pool, equivalent to an effective flow-through of around 8 basis points. On that basis, JM Financial estimates incremental revenue of Rs 2.1 billion in FY27 and Rs 4.7 billion in FY28, with adjusted EBITDA rising by Rs 1.4 billion and Rs 4.4 billion, respectively, after accounting for the loss of UPI incentives.

Emkay Research takes a more bullish view of Paytm’s long-term value. It estimates FY28 UPI MDR revenue of Rs 11.2 billion and calculates that the discounted value of the stream could add Rs 434 billion to Paytm’s valuation, equivalent to Rs 678 per share. Its target price rises to Rs 2,400 from Rs 1,700.

Jefferies has raised its Paytm target price to Rs 2,150 from Rs 2,100 and lifted its FY28 and FY29 earnings estimates by 10% to 12%. It also expects a modest benefit in FY27, raising its profit estimate by 18%.

Beyond the UPI MDR boost

Merchant loans a key driver: Bernstein expects Paytm’s financial services revenue to grow at around 27% CAGR between FY26E and FY30E, driven primarily by its merchant loan distribution business. The brokerage expects merchant loans to remain the key contributor, accounting for around 75% of financial services revenue. Analysts have pegged the target price at Rs 2,200, sharply higher from its previous price target of Rs 1,500.

Bernstein sees Paytm having a clear competitive advantage and a long runway for growth, even if the company only achieves modest increases in loan penetration among its merchant base.

Strong operating leverage: Analysts expect meaningful operating leverage from Paytm’s existing businesses, with indirect expenses projected to grow only around 8% as key cost drivers peak. Technology costs are expected to remain stable, while slower device additions should keep sales and merchant acquisition costs under control.

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Any incremental spending is likely to be directed towards new initiatives that can generate additional revenue.

New avenues for Paytm

Paytm reported its first full year of profitability in fiscal 2026, with a net profit of Rs 552 crore compared to a loss of Rs 663 crore in FY25.

Speaking at the AGM, Vijay Shekhar Sharma also said that Paytm was growing at more than twice the market rate and remained confident of regaining market share in UPI.

For the month of August, Paytm had 7.9% of the UPI market, behind Walmart-owned PhonePe at 46.2% and Google Pay at 32.6%. Paytm’s UPI market share peaked at around 14% in January 2024 before regulatory restrictions imposed by the Reserve Bank of India on its payments bank led to a sharp decline.

Sharma added that Paytm is now looking beyond payments for its next phase of growth, particularly towards artificial intelligence and international financial services.

The company has named its AI capabilities “Paytm Intelligence”, or Pi, and plans to use them to help enterprises deploy AI agents for workflows and business processes. Sharma said the company expects AI-related revenues to begin appearing in its commerce and cloud businesses in about 500 days.

Downside risks for Paytm stock

MDR on UPI is not introduced: Bernstein estimates assume the introduction of MDR on UPI transactions, which accounts for 30% of its EBITDA forecasts. Consequently, any decision by the government or regulator to retain the zero-MDR framework, whether due to merchant resistance, policy considerations, or concerns around digital payment adoption, would represent a material downside risk to earnings estimates.

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While Paytm's core payments, merchant subscriptions and lending businesses would remain intact, the absence of MDR would eliminate a significant earnings driver that’s baked into the base case, it said.

Slowdown in device additions: The forecasts assume device additions will gradually moderate from the current >20% growth rate. A sharper-than-expected slowdown in merchant acquisition could weigh on subscription revenue, merchant loans and payment monetization, given the central role of Paytm’s device network in driving growth across its ecosystem.

For Paytm, the UPI MDR opportunity comes at a crucial juncture. The company has returned to profitability, its shares have staged a sharp recovery and it is pursuing new growth avenues beyond payments. Whether that momentum can finally carry the stock back to its Rs 2,150 IPO price, however, remains the big question after five years of waiting.

Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.