Paytm stock crashes 10%, sharpest intra-day fall in 16 months; here's why

 

Share price of One 97 Communications (Paytm) today

One 97 communications, which is the parent company of Paytm, shares fell 10 per cent to 864.20 on the BSE in the Thursday intraday trade amid huge volumes after the Finance Ministry refuted reports that merchant discount rate (MDR) is levied on Unified Payments Interface (UPI) transactions.

This way, the share price of the financial technology (fintech) company reported the biggest intra-day trade decline in the past 16 months. Feb 2, 2024: Stock price of Paytm had crashed 20 per cent in a single trading day, on the BSE, earlier.

This way, the share price of the financial technology (fintech) company reported the biggest intra-day trade decline in the past 16 months. Feb 2, 2024: Stock price of Paytm had crashed 20 per cent in a single trading day, on the BSE, earlier.

Paytm was down by 9 per cent to 872.20 at 09:32 AM, whereas the BSE Sensex was up by 0.16 per cent. The counter recorded massive traded value with a total of 7.35 million shares worth being traded in the initial 17 minutes of the trade on the NSE and the BSE. In the meantime, the stock had already recovered 47 per cent of its March 2025 low of 652.30 on the BSE.

Finance Ministry clarifies there is no report of fee on UPI transactions

Finance Ministry on Wednesday dismissed reports that a fee will be charged on UPI transactions as “absolutely false, unfounded, and misleading”.

“Speculation and claims that the MDR will be charged on UPI transactions are completely false, baseless, and misleading,” the ministry stated in a post on social media platform X. 

These unfounded and sensation-provoking speculations have an unnecessary effect on uncertainty, fear and suspicion among our citizens. The government is also fully invested in ensuring digital payments through UPI.”

MDR is an amount that is paid by the merchants to the banks or other payment processing firms to enable them to process the credit and debit card transactions. MDR in India is the subject of debate and discussion, especially as it applies to UPI transactions.

Previously, media reports indicated that the government of India was looking at introducing MDR charges on UPI transactions above 3,000 rupees.

Sentimentally negative for Paytm

The non introduction or delay of MDR is sentimentally adverse to Paytm.

Q4 earnings call management of Patym had stated that they are of the view that MDR on UPI ought to appear soon rather than later. We do believe that it could present at any given point of time considering what we are witnessing in the current financial year. And that would mean the monetization of QR implementation, acquisition and the consumer app all. And I believe that the numbers, etc., and when and how is something, which remains to be seen or to be discussed. And that will bring so called monetization to UPI. The management said they did believe that.

Motilal Oswal Financial Services (MOFSL) estimates that the possible implementation of MDR on UPI would lead to a massive increase in the revenue of Paytm and would also motivate the company to increase its market share in consumer payments. The brokerage firm had earlier said in the Q4 result update that Paytm is likely to takes about 7-8 bp of the total MDR collected.

In FY25, Paytm noted that it had recovered in terms of business metrics in the previous year. The disbursement recovery is progressing well with strong disbursement in merchant loans. Gross Merchandise Value (GMV) too showed steady state recovery, MOFSL said in a neutral rating on the stock.

Even though Paytm narrowed down the total loss in FY25 driven primarily by consolidation of the business and optimisation of costs, analysts at Emkay Global Financial Services in the Q4FY25 result update said that they project it to become net profit-positive in FY26 owing to acceleration of revenue both in payment as well as the financial services business, higher treasury income on increase in cash balance following recent stake sales, and reduction in depreciation/ESOP cost.

Further, a possibility of re-introduction of MDR on high-value UPI transactions and receipt of payment aggregator and wallet license (either its own or on rent) should also impact its revenue/profitability and stock catalyst, the brokerage firm had added.

About Paytm

Paytm is the most renowned mobile payments and financial services distribution organization in India. Paytm is the pioneer of the mobile QR payments revolution in India, and it creates technologies that empower small businesses with payments and commerce. The mission of Paytm is to impact half a billion people in India and to get them into the mainstream economy using technology.