Paytm vs. Pine Labs: Who stands to gain the most from the new UPI MDR, and which stock promises substantial returns?
Paytm vs. Pine Labs: A major shift is set to occur in the digital payments landscape. Starting October 15, 2026, the era of a zero Merchant Discount Rate (MDR) on select Unified Payments Interface (UPI) transactions will come to an end. An MDR of 0.4% will now apply to Person-to-Merchant (P2M) UPI payments exceeding ₹2,000. However, many smaller payments remain exempt from this full-rate structure. This new rule has opened up a new revenue stream for companies operating in the payments sector.
This change is poised to be significant for companies ranging from Paytm to Pine Labs. UPI transactions that were previously conducted without any charges will now become a source of income for these firms. However, the real question is how much revenue will actually be added to their balance sheets; this will depend entirely on transaction values, revenue-sharing models, and sectors that remain exempt.
**Pine Labs: A Major Revenue Opportunity**
According to Sunny Agrawal, Head of Fundamental Research at SBI Securities, MDR could generate a substantial annual revenue pool of approximately ₹20,000 to ₹22,000 crore. The brokerage report suggests that merchant acquirers could capture about 30% of this pool, while UPI applications are expected to secure around 20%. Pine Labs operates in the merchant acquiring space, whereas a significant portion of Paytm's business is driven by its UPI app.
Agrawal notes that within this ₹20,000–₹22,000 crore pool, Pine Labs—as a merchant acquirer—faces a broader scope of opportunity. However, the entire 0.4% MDR will not accrue as earnings to any single company. Only about 20 to 30 percent of the annual Gross Merchandise Value (GMV) of both companies is likely to fall within the scope of MDR. This new rule could boost Pine Labs' profits by ₹50–100 crore—a significant jump considering the company's reported profit (PAT) of ₹113 crore in FY26. Meanwhile, Paytm's profits are projected to rise by ₹100–200 crore; Paytm recorded a PAT of ₹552 crore in FY26.
**Paytm: The Top Choice for Investors**
According to Sameer Sawant, a research analyst at Mirae Asset Sharekhan, Paytm is poised to emerge as the strongest player once the zero-MDR regime ends. The primary reason is that Paytm is the only listed company present on both sides of a UPI transaction. On the consumer side, Paytm operates as a UPI app; when a customer makes a payment via the app, the company earns the app provider's share. On the merchant side, Paytm functions as a payment aggregator, with its QR codes and Soundboxes installed at millions of outlets, allowing it to earn revenue from the other end of the transaction as well.
In contrast, Pine Labs benefits only from the merchant side. Furthermore, its large enterprise clients are likely to negotiate fees aggressively. The 40-basis-point (bps) MDR is distributed rapidly: 2 bps goes to the UPI fund, followed by 15 bps to banks, and 4 bps to Payer PSP banks. Finally, aggregators must share their earnings with partner banks, leaving them with only 4–5 bps. Sawant noted that the entire UPI ecosystem could generate an additional ₹16,000–18,000 crore in annual revenue.
Brokerage House Raises Share Price Targets
Jefferies has revised its estimates following the notification regarding MDR. The brokerage had previously projected an MDR of 25 basis points for Paytm. According to the new report, Jefferies expects the expanded MDR revenue pool to drive an additional 10–12% increase in Paytm's earnings by the 2028–29 fiscal year. Consequently, Jefferies has raised Paytm's target price from ₹2,100 to ₹2,150.
For Pine Labs, Jefferies projects an additional revenue of ₹1.6 billion by the 2028 fiscal year. This figure could represent approximately 20% of its projected earnings before interest and taxes (EBIT). The brokerage has also raised Pine Labs' target price from ₹180 to ₹235.
