Fintech leader Paytm has announced impressive financial results for the July-September quarter of fiscal year 2024, showcasing a significant surge in revenue and a remarkable reduction in net losses. The company’s latest report reveals a 32% increase in revenue, amounting to INR 2,519 crore during this quarter, compared to the same period the previous year. Notably, Paytm’s net loss has narrowed down to INR 292 crore, a substantial improvement from the INR 571.5 crore net loss reported in the corresponding quarter of the previous fiscal year.
Paytm attributes its impressive growth to several key factors, including a rise in Gross Merchandise Value (GMV), increased merchant subscription revenues, and the continued expansion of loans distributed through its platform. It’s important to note that no UPI incentives were booked during this quarter, indicating that this growth is driven by the company’s inherent strength and expanding services.
Furthermore, the company reported a substantial improvement in its operational income or adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). Excluding expenses related to Employee Stock Ownership Plans (ESOP), Paytm’s adjusted EBITDA increased by INR 319 crore year-over-year, reaching INR 153 crore. This marks a significant turnaround from a loss of INR 166 crore in the same quarter of the previous fiscal year, and it represents Paytm’s first-ever adjusted EBITDA profitability, achieved in the third quarter of fiscal year 2023.
Key areas contributing to Paytm’s strong performance include its payments business, which saw a 28% year-over-year revenue increase, totaling INR 1,524 crore. By September, approximately 92 lakh merchants were paying subscriptions for Paytm’s devices, a YoY increase of 44 lakh and a QoQ increase of 14 lakh. This growth was further propelled by a 60% YoY increase in the net payment margin, reaching INR 707 crore. This surge was attributed to the increase in payment processing margin and merchant subscription revenues. The payment processing margin was at the higher end of the 7-9 basis points range due to the growth of non-UPI instruments, including postpaid, EMI, and cards, and improvements in payment processing margin on these non-UPI instruments.
Moreover, Paytm’s revenue from financial services, including loans, experienced a substantial 64% year-over-year increase, totaling INR 571 crore. The company successfully disbursed loans worth INR 16,211 crore, with INR 9,010 crore coming from Paytm Postpaid, INR 3,927 crore from personal loans, and INR 3,275 crore from merchant loans via partner banks and Non-Banking Financial Companies (NBFCs), marking a YoY increase of 122%. Notably, Paytm adjusted its approach by reducing the value of personal loans with shorter tenors (six months), deeming them as riskier. This strategy led to a decrease in the value of loans while maintaining consistent disbursal volumes. Currently, Paytm has partnered with nine NBFCs and banks for its credit card and loan distribution business, with the number of unique users who took loans through the Paytm platform reaching 1.18 crore.
Despite the impressive revenue growth, total expenses increased by 14% to INR 2,936.7 crore, with employee benefit expenses and payment processing charges constituting a significant portion. However, Paytm effectively managed to reduce its marketing and promotional expenses from INR 327.5 crore to INR 258 crore in comparison to the previous year’s period.
Paytm also expressed optimism regarding the RuPay credit card on UPI opportunity, highlighting its potential to become a significant revenue stream for UPI payments in the long term.
Investment bank Jefferies recently initiated coverage on Paytm, offering a ‘buy’ rating and setting a target price of INR 1,300. Jefferies is confident that Paytm will become a profitable fintech company on a global scale within the next four quarters. They anticipate Paytm to achieve profitability by the third quarter of fiscal year 2025 and sustain growth in accounting profits thereafter.
In response to these promising financial results, shares of Paytm concluded 1.20% higher on Friday, reaching INR 980.05 apiece on the National Stock Exchange (NSE).
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