Paytm, MobiKwik, Pine Labs Shares Plunge 10% Amid MDR Delay
Shares of leading payment firms fell significantly following a request to postpone the Merchant Discount Rate rollout.
Shares of Paytm, MobiKwik, and Pine Labs dropped up to 10% on October 8.
Industry bodies requested a delay in the Merchant Discount Rate implementation from October to January 2027.
Goldman Sachs raised Paytm's price target despite the stock's decline.
On October 8, shares of major payment aggregators including Paytm, MobiKwik, and Pine Labs experienced a sharp decline of up to 10%. This downturn followed reports indicating that industry associations and traders have requested a postponement of the Merchant Discount Rate (MDR) rollout, originally scheduled for October 15, 2023, to January 2027. The request has reportedly been submitted to both the Finance Ministry and the National Payments Council of India (NPCI).
The proposed MDR, which would impose a fee of 0.4% on Person-to-Merchant (P2M) transactions exceeding ₹2,000, has raised concerns among small retailers and micro, small, and medium enterprises (MSMEs). Stakeholders argue that the implementation could adversely affect their operations. The MDR is capped at ₹300 for transactions of ₹75,000 and above, with a fixed fee of ₹5 applicable to certain categories. Previous requests from trade bodies included calls for a higher exemption threshold and a phased implementation approach.
As a result of the news, Paytm shares saw a significant drop, making it the largest loser on the Nifty 500 index, trading at ₹1,558, marking a 10% decrease. MobiKwik shares fell by 8.3% to ₹235.8, while Pine Labs shares decreased by 4% to ₹170.9. This decline has trimmed MobiKwik's year-to-date gains to just 2.5%.
Interestingly, the decline in stock prices coincided with a positive outlook from Goldman Sachs, which raised its price target for Paytm from ₹1,500 to ₹2,070. The brokerage firm noted that despite the current challenges, there are favorable conditions for Paytm, suggesting a potentially positive risk-reward scenario for investors.
Looking ahead, the decision regarding the MDR rollout is expected to be made soon, with stakeholders eagerly awaiting the government's response to the deferment request. The outcome will likely have significant implications for the payment industry and its stakeholders, particularly small retailers and MSMEs who are concerned about the financial impact of the MDR.
