Paytm: Circular has no impact on revenue earned from merchants

The Indian government has dismissed recent speculation about potential changes to merchant discount rates (MDR) on UPI transactions, reaffirming its commitment to maintaining zero MDR for digital payments. This clarification follows a temporary 10% decline in Paytm's stock price, triggered by unconfirmed reports suggesting a policy reversal. However, Paytm's revenue streams from merchant services remain largely insulated from such regulatory fluctuations, driven by its robust merchant acquiring business and cost-efficient operations.

According to a February 23 Bernstein report, Paytm's merchant-focused strategy has delivered superior monetization compared to peers. The company generated Rs 3,979 crore in revenue during H1 FY26, a 26% year-on-year increase, with merchant-related revenue outpacing competitors despite processing a lower total payment value. This is attributed to Paytm's extensive network of payment devices, cross-selling of credit products, and higher-margin transaction flows. Bernstein noted that Paytm's revenue per active merchant and per device is more than twice that of its largest rival, supported by stronger lending penetration and cost discipline.

Paytm's profitability has also improved, with breakeven achieved at the profit-before-tax level in FY26 and three consecutive profitable quarters. The company's ESOP expenses at 1.6% of H1 FY26 revenue further underscore its operational efficiency. Analysts suggest that Paytm's structural advantages in merchant economics—such as cross-selling loans and device-led revenue—provide a clearer path to long-term profitability, independent of short-term regulatory noise.

(https://m.economictimes.com/industry/banking/finance/merchant-focus-gives-paytm-clearer-path-to-profits-bernstein/articleshow/128707639.cms): Bernstein report, February 23, 2026.
(https://www.facebook.com/yourstorycom/posts/-paytm-shares-tumble-10-as-govt-dismisses-reports-on-merchant-discount-ratesshar/1154083593420280/): Government dismissal of MDR speculation, February 2026.