UPI MDR bonanza: Why Paytm may win bigger, but Pine Labs could gain faster

Paytm and Pine Labs are poised to become early beneficiaries of the government’s decision to monetise high-value UPI payments. Still, the new revenue stream could have very different consequences for the two fintechs.

Paytm is positioned to capture the larger absolute opportunity, with analysts estimating FY28 UPI MDR revenue of as much as Rs 1,160 crore. Pine Labs, with a smaller UPI base, could see a sharper impact on earnings, with the new revenue stream potentially contributing about 20% to its EBIT and profit before tax estimates.

The distinction could shape how investors value the two companies as the new framework takes effect from October 15.


The government has notified a 40-basis-point merchant discount rate on person-to-merchant UPI transactions above Rs 2,000. The framework leaves most of UPI untouched: person-to-person payments, transactions up to Rs 2,000 and small merchants receiving up to Rs 100,000 a month through UPI QR codes remain outside the charge.

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Yet 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.

“That rate is set; the split is not,” JM Financial said in its assessment of the framework.

That unresolved allocation is the biggest variable for both companies. 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%.

Paytm’s advantage is scale. Emkay estimates that UPI P2M transactions account for 85% of Paytm’s overall GMV, with 35% of that value considered eligible for MDR after adjusting for capped and concessional categories. The firm estimates Paytm’s eligible UPI GMV at Rs 11.2 trillion in FY28.

Pine Labs has a smaller opportunity in absolute terms, but a potentially greater earnings impact.

Jefferies estimates Pine Labs could generate Rs 1.6 billion of incremental revenue from UPI MDR in FY28. That would represent about 20% of its EBIT and profit before tax estimates, while the report’s sensitivity analysis indicates an impact of about 14% on adjusted EBITDA.

Emkay estimates Pine Labs’ FY28 UPI MDR revenue at Rs 1.55 billion. The discounted value of that revenue stream could add Rs 51.5 billion to the company’s valuation, or about Rs 43 per share. Its target price rises to Rs 230 from Rs 190.

Pine Labs’ exposure is linked to its merchant acquiring and payment acceptance business. Jefferies estimates its annualised UPI GMV at Rs 3.96 trillion by FY28, with 70% of transactions above Rs 2,000. It assumes a 6-basis-point realised take rate for the company, compared with 10 basis points for Paytm in Emkay’s estimates.

Paytm combines a large merchant network with a consumer-facing UPI application, while Pine Labs’ opportunity is more closely tied to acquiring and acceptance.

Analysts also differ in their assumptions about the amount of eligible GMV and the share retained by each participant. That means the estimates should not be read as directly comparable forecasts. Still, the broad investment conclusion is consistent: Paytm has the larger rupee opportunity, while Pine Labs may experience the faster earnings acceleration.

There are also risks to the revenue projections. Essential services such as electricity, telecom, insurance, fuel and utility bill collections face a flat Rs 5 charge above the threshold. Capital market transactions attract MDR of only 0.02%, capped at Rs 300, while transactions of Rs 75,000 and above face a Rs 300 cap under the standard rate.

Analysts also flag possible competitive discounting among acquirers, migration of high-value payments to alternative payment rails and changes in payment behaviour around the Rs 2,000 threshold. JM Financial estimates that Paytm’s FY28 adjusted EBITDA uplift could range from 2.5% to 52.1%, depending on the eligible GMV and the effective flow-through.

For now, the UPI framework converts a payment ecosystem that has largely operated without transaction-linked revenue into a potentially recurring commercial model. Emkay describes the shift as one from a discretionary annual subsidy to revenue that is “contractual, recurring, and scales with value.”

For Paytm, that could become a major valuation catalyst. For Pine Labs, the same framework could deliver a more immediate transformation in profitability. The outcome will ultimately depend on the MDR-sharing formula and how much of the high-value UPI market remains on the platform once payments acquire a price.

(Disclaimer: This article has been written by Nikhil Agarwal, who is not a SEBI-registered Research Analyst or an Investment Adviser. Nikhil Agarwal 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)