Paytm shares tumble on reports India will delay UPI merchant fees

Paytm shares took a sharp hit on Thursday as reports surfaced that India might postpone its plan to introduce merchant fees on major UPI transactions. Investors, who had anticipated a significant revenue boost for the payment platform, reacted quickly to the prospect of a delay.

The stock of parent company One97 Communications tumbled by as much as 10% in early morning trading on the National Stock Exchange, sinking to a low of ₹1,558.80—its lowest price since mid-August. The plunge wiped over ₹10,970 crore off Paytm's market capitalisation, briefly dragging its valuation below the ₹1 lakh crore threshold. Although the stock clawed back some losses to trade around 5% lower at ₹1,641 by midday, the sudden sell-off broke a three-day winning streak. Other digital payment players, including Pine Labs and MobiKwik, also saw their shares slide.

The market reaction was triggered by reports from Reuters and Business Standard indicating that the government and the National Payments Corporation of India (NPCI) are considering pushing back the rollout of the new Merchant Discount Rate (MDR). Initially scheduled to kick in on 15 October, the 0.4% fee on transactions above ₹2,000 may now be deferred to 1 January next year.

According to sources familiar with the discussions, the proposed delay is intended to give payment companies more time to upgrade their backend systems. It also aims to avoid placing an extra financial burden on retailers during the peak festive shopping season, which runs from October through to Christmas.

Why the fee matters to Paytm

For Paytm, the timing of the delay is a setback. The company had positioned itself as one of the primary beneficiaries of the new fee regime. Analysts had estimated that the MDR could generate up to ₹1,160 crore in additional revenue for Paytm by the 2028 financial year. The prospect of these new inflows had previously prompted several brokerages to raise their price targets and earnings estimates for the company.

Market analysts suggest the current drop is largely a sentimental reaction to the news rather than a shift in long-term fundamentals. Sudeep Shah, head of technical and derivatives research at SBI Securities, noted that while the stock fell below its 50-day exponential moving average, strong buying at lower levels helped it recover some ground.

Analysts point to the ₹1,550 to ₹1,560 range as a key support level. Sumeet Bagadia, executive director at Choice Broking, advised existing shareholders to hold the stock, maintaining a strict stop-loss at ₹1,550 on a closing basis. He added that new investors could look to buy at current levels, targeting a rebound towards ₹1,750 and ₹1,850.

For now, neither the government nor the NPCI has made an official announcement regarding the delay.