Shares of One97 Communications Ltd., the listed parent company that operates the Paytm brand, have gained 70% so far in FY27, pushing the stock to a more than four-year high and making it one of the market's strongest performers this year.
The shares have risen for a fifth consecutive month and gained 22% in August, making One97 Communications the best-performing stock in the futures and options segment during the month.
Yet the recovery remains incomplete. One97 Communications shares are still 24% below their IPO price of Rs 2,150.
That leaves investors with a key question: Can the rally in the company behind Paytm continue, and could the stock eventually reclaim its listing price?
What Changed
A potential change in the economics of UPI payments has emerged as a new earnings opportunity for One97 Communications.
The company operates the Paytm brand and its listed shares trade under the ticker PAYTM.
UPI payments currently carry no transaction fee for customers or merchants. Banks, the National Payments Corp. of India and payment platforms such as Paytm, PhonePe and Google Pay still bear the costs of technology, infrastructure, customer support, fraud prevention and risk management.
The zero-MDR framework has been in place since Jan. 1, 2020. Industry participants have argued that the system needs a mechanism to recover the cost of processing transactions, while the government has treated zero-cost UPI payments as part of its financial inclusion framework.
A parliamentary committee report, a shift in official messaging and a proposed amendment to the law governing payments have made the introduction of a merchant discount rate, or MDR, on UPI transactions appear more plausible.
For One97 Communications, that could create a new source of earnings from the payments ecosystem operated under the Paytm brand.
The rally has also been supported by stronger earnings, gains in UPI market share and the growing contribution of financial services. Operating leverage has also improved as the business expands.
Paytm's Soundbox and device ecosystem remains another part of One97 Communications' merchant offering and competitive position.
ALSO READ: Paytm Board Proposes Pay Hike for CEO Vijay Shekhar Sharma, Ties Variable Salary To Profitability
What Could Stop It
The biggest uncertainty remains the timing of any decision on UPI MDR.
Even if a fee structure is introduced, the eventual rate could fall below investor expectations. The competitive environment could also limit how much of the benefit One97 Communications captures.
There is another risk to the existing business model. If the company earns more directly from UPI transactions, MDR revenue could potentially reduce the importance of income from Soundbox and device rentals.
Capital allocation also remains an investor concern. After a sharp run in the share price, valuation leaves less room for disappointment if earnings or new revenue opportunities fail to meet expectations.
The stock's rise has therefore brought a new question into focus: whether the market is already pricing in a meaningful share of the potential benefit from changes in UPI economics.
ALSO READ: Paytm Gets SEBI Notice Over 2023 Announcement: What The Regulator Flagged
Analysts Divided
Bloomberg data shows 17 analysts have a buy rating on One97 Communications, five recommend holding the stock and one has a sell rating.
The consensus 12-month target price is Rs 1,569, implying a potential downside of 4% from current levels. The highest target price is Rs 2,200, suggesting 35% upside, while the lowest target of Rs 1,050 points to a potential decline of 36%.
The range reflects the uncertainty surrounding the next phase of the rally.
One97 Communications has climbed to a more than four-year high, its shares have gained 70% in FY27 and the stock has become August's best-performing F&O name. But the next leg may depend on whether potential changes in UPI economics translate into earnings and whether the company's other growth engines continue to deliver.
For investors, the distinction is important: they are buying shares of One97 Communications Ltd., while Paytm is the brand and platform through which the company operates its payments and financial services businesses.
The shares remain 24% below the IPO price of Rs 2,150. The recent rally has narrowed that gap. Whether One97 Communications can close it may depend on UPI MDR, earnings growth, competition, revenue mix and investor expectations.
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