MC EXCLUSIVE PayU India expects Ebitda breakeven in FY26, bets on merchant lending for credit turnaround: Group CFO

Arvind Agarwal, CFO, PayU

PayU India expects to achieve Ebitda breakeven this fiscal, the digital payments company’s Group chief financial officer (CFO), Arvind Agarwal, has said.

In a wide-ranging interview to Moneycontrol on July 17, Agarwal spoke about how both the payments and credit businesses are now stable after regulatory delays and shifts in the lending model.

“Our payment business has been profitable (Ebitda positive) for the last three years. It has not been burning any cash. The credit business will become break-even in this quarter (Q2FY26). As a whole, therefore, PayU India will be Ebitda profitable in this year itself, FY26,” Agarwal said.

Ebitda is short for Earnings Before Interest, Taxes, Depreciation, and Amortisation.

PayU ended FY25 with losses from its main operations despite strong revenue growth in both verticals. According to the Dutch parent Prosus' financials, India revenue came in at $669 million (Rs 5,548 crore), up 24 percent in dollar terms, and 22 percent in rupee terms, a jump from the 15 percent in FY24.

“We are now a top-three fintech platform in India by revenue after PhonePe and Paytm. In online payment processing, we are the market leader,” Agarwal, who joined PayU in 2022 after serving as CFO at Nykaa, said.

Despite the growth, the company reported an adjusted Ebit margin of -7 percent. It included all costs per Prosus’ reporting format, Agarwal said. On an Ebitda basis, the payments unit has remained profitable for three years.

In FY25, the company processed nearly $80 billion in total payment volume and expects to cross $100 billion this fiscal, handling 2.5 billion transactions. Agarwal said the segment holds a 20 percent gross margin and a 5 percent Ebitda margin.

Value-added services amp up payments revenue 

Agarwal credited margin stability to strong merchant relationships and increasing revenue from value-added services such as checkout EMI, fraud-risk scoring, recommendation engines and dynamic currency conversion.

“Almost 25 percent of our payment revenue came from value-added services,” Agarwal said. “We are also investing heavily with Mindgate on UPI innovations and with Wibmo on fraud-risk management and tokenisation.”

Credit business: Calibrated growth, merchant lending focus 

PayU claims to have disbursed Rs 9,500 crore ($1.1 billion) in loans in FY25, growing its credit AUM to Rs 5,000 crore. The credit business was making losses earlier due to reliance on direct selling agents (DSA) and aggregator-based sourcing, which became costlier as regulatory scrutiny increased.

“We call this the ‘old book’. During 2023 and early 2024, credit costs went up as our models couldn’t account for new digital lending guidelines,” Agarwal said.

Since mid-2024, PayU shifted to digital ecosystem-led sourcing. The current credit model includes checkout finance, personal loans and small and medium business (SMB) lending — each contributing roughly one-third to loan originations.

Merchant lending alone now accounts for one-third of AUM (around $150 million) with partners such as Swiggy, Meesho, PhonePe, and Paytm.

“We’ve lent to almost 2 lakh merchants using data science-driven underwriting,” Agarwal said.

He expects credit to turn profitable in Q2FY26. “We already have 4–5 percent ROA (return on assets) on marginal cost basis. In two to three years, we want to reach 15 percent ROE (return on equity),” he added.

Currently, 90 percent of lending is on PayU’s NBFC book. Agarwal said on-book lending offers stronger unit economics. “The manufacturer always has a higher profit pool,” he said.

Restructuring yields results   

The company also made structural changes to align with regulatory requirements, particularly in response to the Reserve Bank of India’s concerns around its complex structure.

In April 2024, PayU received an in-principle nod for a payment aggregator licence, after an embargo of almost 15 months, and secured final approval in May 2025. The regulator’s order, which restricted the fintech from onboarding new merchants, affected its financials, which, the firm claims, are on the mend.

“We had built the business organically but also through acquisitions, and the structure had become complex. The RBI wanted us to simplify. So, we brought everything under one holding company (Holdco), PayU Payments,” Agarwal said.

All businesses, including payments, NBFC, Bharat Bill Payment System (BBPS), and pre-paid instruments, are now fully licensed and integrated under a single Indian entity that rolls up to Prosus’s fintech arm in the Netherlands. “We are now inspected annually by the RBI on both the NBFC and payment sides and we continue to strengthen our risk and compliance frameworks,” he said.

Compliance cost

On the heightened scrutiny around payment aggregators and payment gateways, Agarwal said compliance standards have become “almost bank-like”, especially for KYC, merchant onboarding and risk monitoring.

“It has indeed increased our cost of compliance, but with scale, we’ve absorbed it. We still maintain a 5 percent Ebitda,” he said, noting a drop in the cost-to-income ratio from 20 percent to 15 percent over the past three years.

The governance push will ultimately separate high-compliance players from those cutting corners, strengthening PayU’s long-term position in the ecosystem, Agarwal said.

Capital deployment 

PayU received $200 million from Prosus in FY25, split equally between credit expansion and payments tech investments, including Mindgate. Another $100–120 million will be deployed in FY26, again equally split.

Payments, being capital-light, will use funds for innovation, especially around UPI. “Mindgate processes nearly 50 percent of India’s UPI volume. Their revenue grew 40 percent and transactions 50 percent last year. That’s where we’ll keep investing,” he said.

PayU’s broader SaaS business (mostly serving banks), including Wibmo and Mindgate, is expected to exit FY26 with $100 million in Annual Recurring Revenue (ARR).

As both segments stabilise, Agarwal ruled out the need for capital to cover operational losses. Capital will support balance sheet growth, merchant lending (which could grow to 40–45 percent of AUM by end-FY26), and new initiatives like cross-border commerce, where PayU has applied for a PACB licence.

As for IPO timelines, he said financial readiness remains the key milestone. “We don’t need capital for cash burn anymore. Payments is Ebitda positive, credit is at breakeven, and overall, we are well capitalised,” Agarwal said.