Target: ₹1,010

CMP: ₹801.10

With One 97 Communications (Paytm) working its way up post the disruption last year, we anticipate three potential regulatory triggers over the coming fiscal year – MDR (merchant discount rate) on higher ticket/larger merchants’ UPI payments; removal of embargo on Paytm Payments Bank; and Grant of PA (Payment Aggregator)/PG (payment gateway) license.

Pre Jan-2020, 0.30 per cent MDR was applicable on UPI P2M transactions that was reduced to zero to promote digital transactions. However, there is a strong business case for MDR on higher ticket payments or on payments made at larger merchants.

Since the embargo that came up in January 2024, PPBL has been focused on ramping up compliance with Vijay Shekhar Sharma recently suggesting that PPBL is at an arm’s length and hoped to have this sorted soon. 

With CMP implying 25x FY27E adj. EBITDA multiple, we find limited downside but upside movement could be sharp and substantial, particularly considering our FY27 EBITDA estimate can rise by about 35 per cent if either of trigger 1 or trigger 2 materialise

However, we lower target multiple to 60x FY27E PER, lowered from 70x earlier considering the rising volatility in equity markets.