"No more adjusted anything," Vijay Shekhar Sharma drops the EBITDA filters at Paytm

Paytm founder Vijay Shekhar Sharma (PTI)

In a decisive shift towards transparency and accounting discipline, Paytm founder and CEO Vijay Shekhar Sharma declared that the company will no longer present adjusted metrics like EBITDA before ESOP costs, calling the practice a thing of the past. Speaking during the Q1 FY26 earnings call, Sharma said this would be the last time the company mentions such metrics and from the next quarter onwards, all employee stock option expenses would be part of reported employee cost.

“This is the first quarter where we are obviously, if you read the earnings release, we have pruned out every word which included ‘EBITDA before ESOP’, ‘adjusted EBITDA’, or anything before ESOP," Sharma said.

"Next quarter onward, we will stop giving the ESOP line, and it will be only the employee cost. Thats the big message...we are maturing towards absolute complete employee cost. ESOP cost is the cost of the management. So there we go...No more adjusted anything."

The remarks mark a decisive shift for the fintech firm, which had previously used adjusted EBITDA to account for non-cash ESOP charges, a common method used by growth-stage startups to showcase underlying operational performance. Now, with this move, Paytm is signaling its intent to communicate only standardised GAAP-compliant figures going forward, the management said.

Paytm Q1 results: Firm swings into black, posts net profit of Rs 123 crore, revenue up 28%

The comment came as the company reported a positive EBITDA on a GAAP basis for the first time, with a contribution margin hitting 60 percent, a significant leap from 50 percent in the same quarter last year.

President and Group CFO Madhur Deora reinforced this new approach, stating clearly that the company is not just dropping adjustments—it’s dropping the language too.

“We are also not doing adjusted EBITDA anymore. We are not doing EBITDA before ESOP. This is straight-up EBITDA, reported GAAP EBITDA,” said Deora. Sharma added that the team had even combed through the earnings release to remove any lingering references to “adjusted” terms.

On contribution margins improvement 

The company’s contribution margin rose to 60% in Q1 FY26, up from 56% in the previous quarter and 50% in Q1 FY25. Deora called it a “healthy level” and said this trend should continue.

Sharma emphasised that this was achieved even as the company dropped its highest-margin FLDG business. “We lost a high-margin business and still margin went up... so it's incredible that the revenue mix has become healthier,” he said. Deora also reiterated the company’s guidance of reaching 15–20% EBITDA margin over the next two to three years.

FLDG shrinks as lenders drop risk cover

One of the biggest structural shifts this quarter was in Paytm’s lending model. Loans backed by First Loss Default Guarantee (FLDG) dropped significantly, contributing to lower financial services revenue. Deora confirmed the change was intentional and reflected lender comfort with Paytm’s book quality.

“As we’ve discussed before, a lot of our partners moved away from the FLDG model. And so, while those volumes have been maintained, they have moved into a non-FLDG model. That was a large contributor to the decline in revenue,” he said.

“Just to put some data behind it, the AUM in the FLDG model is down more than 40% quarter-on-quarter. So that's very significant,” Deora added.

Sharma clarified that no new partners were added in Q1, but existing partners had renewed confidence in Paytm’s portfolio.

“We have not added a new partner this quarter. It is still the old partners with whom we are building scale, who are already committed, and obviously they saw that the book is performing and they dropped FLDG.”

Payments profitable even without MDR

Even as the regulatory environment keeps UPI MDR at zero, Paytm’s payments business turned profitable. Sharma said the platform’s scale and operating leverage were now clear, and that payments would be a core growth driver.

“It is the core business that is not just break-even—it has operating leverage in it. And we believe that once it starts getting monetised, especially if MDR or a different monetisation line starts to kick in, this will be a large profit driver.”

POS devices cross 1 million, new use cases emerging

Paytm said it has now deployed over 1 million card-accepting POS devices out of its total 1.3 crore devices in the market. Many of these are smart soundboxes that now support chip and PIN, turning them into near-replacements for traditional swipe machines.

Sharma highlighted the tech superiority of their devices, noting: “This chip and PIN device is effectively the new card machine. So soundbox is becoming a card machine. And our differentiation is so superior… Everyone else is a Chinese copy. Our hardware, software stack, etc. work out incredibly better and that gives our product a premium level in the market.”

He added that even after increasing prices on the POS devices from Rs 100 to Rs 129/month, the company saw no churn. “So, if you say, we have taken the price from 100 to 129, and there is no churn, it is reverse elasticity."