Paytm Q3 results: Revenue rises 38%, losses narrow to Rs 222 crore

One97 Communications, the parent company of fintech major Paytm, on January 19, reported a consolidated revenue of Rs 2850 crore, up 38 percent for the third quarter that ended December 2023, as against a revenue of Rs 2062 crore in the corresponding quarter last year, mainly on account of the growth led by the festive season.

The firm's losses narrowed to Rs 222 crore, compared to Rs 392 crore reported in the last financial year.

Compared to the previous quarter, the revenue was up by 13 percent from Rs 2518.6 crore while the loss narrowed by 23 percent.

Payment business update

Paytm earned a revenue of Rs 1730 crore from its payment business, a growth of 45% year on year (YoY), led by an increase in gross merchandise value (GMV) and higher subscription revenue.

The company said the GMV growth was partly boosted on account of timing of festive season as most of the online sales in this financial year were in Q3, whereas in the previous financial year they started in Q2, the company said.

Net payment margin improved further by 63% to Rs 748 crore in Q3FY24, YoY.

Payment margins are dependent on what Paytm earns from non-UPI instruments like post-paid, EMI, and cards, and subscription charges on devices sold to merchants.

As of December 2023, Paytm's merchant subscriptions were 1.06 crore, increasing 49 lakh YoY. The company said it deployed 14 lakh devices in the said quarter, and earns Rs 100-500 per month per device.

Impact of RBI diktat on loan distribution

Paytm’s decision on December 1 to curtail post-paid loans (less the Rs 50,000) had a minor impact on overall financial services revenue, which stood at Rs 607 crore, up by 6.3 percent compared to Rs 571 crore in the previous quarter.

On YoY basis, this was 36% higher from Rs 446 crore.

“As continuation to our disclosure to the stock exchanges on December 6, 2023, we will continue to calibrate Postpaid further in Q4 FY 2024 and beyond on the back of continued macro uncertainty and regulatory guidance for less than Rs 50k loans, ” it said.

As a result, the total loans disbursed by Paytm were down to Rs 15,535 crore in the December quarter as against Rs 16,211 crore in Q2, even as it surged 56 percent YoY basis.

The value of Postpaid loans dropped by 17% at Rs 7469 crore (QoQ).

The other credit categories, including personal loan, merchant loan and co-branded credit cards, continued to perform well.

Out of the total disbursement, merchant loans contributed Rs 3579 crore, personal loans contributed Rs 4460 crore.

The average ticket size and tenure of both the categories also increased.

“We expect this to increase further as proportion of high-ticket loans continue to increase. We will maintain marginal growth on ticket size less than Rs 2 Lakh,” it added.

As per CLSA, the full impact of tightening in BNPL disbursements will only be see in the fourth quarter of FY24, as the company took the decision only a month back.

“We see a large opportunity in the high-ticket loan business, with over 20 million users already whitelisted. We piloted this product in Q2 FY 2024 and has scaled up this quarter as we distributed Rs 490 Cr of loans,” the company said.

Paytm is said to be working with two lending partners for high ticket loans and expect to add at least 3-4 more lending partners by Q1 FY25.

As of December 2023, 1.25 crore unique users have availed loan through the platform, of which 44 lakh were added in the last 12 months.

EBITDA breakeven in 2025

Earlier this month, international brokerage UBS initiated coverage on Paytm with a target price of Rs 900.

The global firm said in a report that Paytm’s strong topline compounded annual growth rate (CAGR) of 54 percent in FY21-24E has been driven by its core payment business and supported by device and loan origination monetisation.

Analysts at UBS expect a moderating 21 percent topline CAGR in FY24-28 while "operating leverage plays out as marketing expense requirements ease and ESOP costs moderate", it said, adding, "As a result, we forecast the company breaking even on EBITDA in FY25 and reaching a 20 percent EBITDA margin by FY28."