Morgan Stanley Upgrades Paytm Parent to Overweight, Raises Target Price to ₹1,950

Global financial services firm Morgan Stanley has upgraded One 97 Communications Ltd, the parent company of digital payments major Paytm, to Overweight from Equal-weight. The brokerage has also raised its price target for the stock by 35 per cent, moving it from ₹1,450 to ₹1,950.

The revised target indicates an upside of approximately 22 per cent based on Paytm's closing price of ₹1,601.60 on October 27. The upgrade follows a 46 per cent rally in Paytm shares over the preceding six months. Despite this recent market performance, Morgan Stanley anticipates further stock re-rating supported by accelerated revenue growth, improved profitability, and favorable industry developments.

According to the brokerage, consensus estimates for Paytm's FY28 earnings before interest, taxes, depreciation, and amortisation (EBITDA) have increased by over 21 per cent during the same period. Morgan Stanley projects Paytm's payments business to accelerate in the second half of fiscal 2027, driven by growth in monthly transacting users and an improving consumer market share in the unified payments interface (UPI) ecosystem.

Data cited by the brokerage indicates that Paytm has grown its consumer UPI payment gross merchandise value (GMV) at roughly twice the industry rate over recent quarters. Payment GMV is forecasted to expand at a compound annual growth rate (CAGR) of approximately 23 per cent between FY27 and FY29.

In addition to core payments, financial services are expected to serve as a primary growth driver. Revenue in this segment is projected to scale up in FY28 as Paytm expands its Postpaid product offerings and strengthens its financial services distribution business. Overall revenue is forecasted to grow at a CAGR of roughly 30 per cent between FY26 and FY29.

Morgan Stanley has consequently raised its FY28 and FY29 EBITDA estimates by 30 per cent and 22 per cent, respectively. The revised figures reflect stronger expectations for payments and financial services, alongside potential financial benefits from prospective changes to the UPI merchant discount rate (MDR) framework.

The proposed MDR framework could generate an incremental revenue opportunity of about ₹900 crore in FY28 and ₹1,100 crore in FY29, according to Morgan Stanley's estimates. The brokerage assumes that 60 per cent to 65 per cent of this benefit will flow directly to EBITDA, with the remainder allocated to additional investments or offsetting competitive pressures. However, realization of these projections remains contingent on the final implementation, timing, and structure of the framework.

Operating profitability is expected to improve significantly as the business scales, with EBITDA forecasted to rise from roughly ₹1,053 crore in FY27 to ₹2,660 crore in FY28, and reaching ₹3,843 crore in FY29. To reflect these developments, Morgan Stanley has increased its valuation multiples across scenarios by up to 11 per cent, incorporating a 60 per cent probability for its base case, 30 per cent for the bull case, and 10 per cent for the bear case.

"Morgan Stanley's upgrade of Paytm highlights a broader market shift toward valuing operational execution and a clear path to profitability in the Indian fintech sector. When large financial institutions revise targets based on metrics like UPI market share and expanding financial services distribution, it signals growing institutional confidence in digital payment business models scaling sustainably. However, external regulatory variables, such as potential changes to the MDR framework, will remain critical factors determining actual earnings realization." — Dr. Shishir Gupta, Founder & CEO, StartupLanes