Morgan Stanley has upgraded One97 Communications to 'Overweight' with a target of ₹1,950, anticipating growth from financial services. While the brokerage highlights potential revenue gains from UPI merchant discount rate changes, investors should weigh this against the company's past regulatory hurdles and ongoing competitive pressure.
Morgan Stanley has revised its stance on One97 Communications, the parent company of Paytm, upgrading the stock to 'Overweight' from 'Equal-weight.' In financial terms, an 'Overweight' rating suggests that the brokerage expects the stock to perform better than the broader market average. The firm has set a price target of ₹1,950 for the stock.
The brokerage’s bullish outlook is primarily driven by expectations of accelerated growth in the company’s payments and financial services divisions. Analysts believe that Paytm is effectively leveraging its large user base to cross-sell higher-margin financial products, such as its Postpaid services. Projections suggest a 30% compound annual growth rate in revenue between fiscal years 2026 and 2029, a pace that analysts expect will be supported by the company’s distribution-led business model.
A significant part of this optimism rests on potential regulatory shifts regarding the Merchant Discount Rate (MDR) framework for UPI transactions. If these changes are implemented, Morgan Stanley estimates that it could add roughly ₹900 crore in revenue by fiscal 2028 and ₹1,100 crore by fiscal 2029. The brokerage expects these changes to contribute significantly to the company’s profitability, with EBITDA, or operating profit, projected to reach ₹3,843 crore by fiscal 2029.
While the brokerage report highlights significant upside, investors should also consider the broader operational context. Paytm has faced substantial regulatory scrutiny in recent years, including restrictions imposed by the Reserve Bank of India on its banking arm. These events previously impacted the company’s business operations and investor confidence. A key area for investors to track remains the company’s ability to maintain regulatory compliance and rebuild its long-term operational stability.
Furthermore, the digital payments sector remains highly competitive. Paytm faces intense rivalry from established players like PhonePe and Google Pay, which command significant market share. While the company has shown signs of improved execution and market share gains in the UPI ecosystem, maintaining this momentum requires consistent growth in merchant acquisition and user engagement despite aggressive pricing strategies by peers.
The next important monitorables for investors will be the actual implementation of any UPI MDR changes, the company’s quarterly profit margins, and whether it can continue to scale its financial services business without further regulatory friction. Monitoring these factors is essential to determine if the company can sustain the projected growth trajectory set out in the current brokerage estimates.