Updated UPI MDR Assumptions Lead Bernstein to Upward Revise Paytm Outlook

After the final UPI Merchant Discount Rate (MDR) framework was released, Bernstein revised its earnings outlook for Paytm upward, noting that the MDR is more favorable than earlier expectations. The brokerage highlights that the revised MDR offers better revenue-sharing terms for both consumer‑side and merchant‑side participants, enhancing Paytm's growth prospects.

According to Bernstein, the new UPI rules grant third‑party application providers (TPAPs) the same extensive MDR treatment as merchant apps, with a clearly defined share of the MDR pool. This parity benefits Paytm, which operates across both sides of the UPI ecosystem.

Bernstein increased its estimate of Paytm's consumer‑side MTR from three basis points to eight, and raised the merchant‑side rate from nine to ten basis points. With these changes slated to roll out mid‑October 2026, the brokerage forecasts a roughly 27% rise in Paytm's revenue for fiscal year 2026‑27.

The analyst also projects that the total UPI person‑to‑merchant (P2M) revenue pool will reach about ₹2.70 lakh crore in FY 2027‑28, with payment apps retaining 40‑45% of the MDR pool. This scenario could deliver an annual revenue opportunity of ₹1.10‑1.20 lakh crore for Paytm.

Bernstein expects the value of UPI P2M transactions to climb from roughly ₹100 lakh crore over the past 12 months to around ₹115 lakh crore in FY 2026‑27 and ₹144 lakh crore in FY 2027‑28, marking a steady 27% annual increase. High‑value transactions (above ₹2,000) make up only about 4% of total transaction count but contribute nearly 67% of the overall transaction value.

Maintaining its “Outperform” rating, Bernstein set a target price of ₹2,200 for Paytm, reflecting the expected improvement in earnings from both consumer and merchant payment channels.