Paytm swings to profits, thanks to massive cut in expenses

Paytm's massive cut in expenses

The Noida-based payments firm reported its first-ever operational net profit of Rs 123 crore during the June quarter, aided by strong growth in lending and a 19 percent drop in expenses. Revenue rose 28 percent year-on-year to Rs 1,918 crore, while EBITDA turned positive at Rs 72 crore.

Marketing expenses also came down dramatically by 64 percent from Rs 275 crore during the December quarter of FY 24 to Rs 100 crore during the June quarter of the current fiscal.

Paytm attributed its profitability in part to the use of AI-led automation across the organisation, spanning onboarding, transaction monitoring, and customer support.

The December quarter of FY 24 was Paytm’s high point in terms of revenue and other operational metrics like monthly transacting users, number of UPI transactions and gross merchandise value.

Paytm’s highest-ever quarterly revenue was Rs 3,000 crore during the third quarter of FY 24. During the latest June quarter, it was Rs 2,150 crore, almost 30 percent lower.

Revenue is still way below the peak

In the January quarter of FY 24, the banking regulator, the Reserve Bank of India, imposed restrictions on Paytm Payments Bank, an associate company that ran the backend for payment services such as UPI and the popular mobile wallet.

This RBI action resulted in the disruption of multiple services, and the company is trying to recoup some of the lost ground.

This is a highly unusual scenario for a large listed company. While not directly comparable, other fast-growing new age digital firms such as Eternal (Zomato’s holding company) and Swiggy saw their expenses during the last six quarters almost double, along with revenue.

For instance, Eternal had reported expenses of Rs 3,400 crore in the December quarter of FY 24, which rose to Rs 7,400 crore in the June quarter of FY 26. Its revenue also grew from Rs 3,500 crore to Rs 7,500 crore.

“In an ideal situation, a large growing company should be growing its revenue while keeping its expense growth in check. That is how a company turns profitable. While the reduction in expenses is commendable, the lack of good revenue growth should be a concern for investors,” said an investor working with a public market investment firm.

However, most analysts are bullish about the company's merchant business, which continued to perform well, helping the company's share price cross Rs 1,000 this year.

Also read: A year after Paytm Payments Bank ban, compliance and merchant focus spark recovery hopes

Some of the key metrics that investors care about, such as merchant subscriptions, such as point of sale (POS) machines, and soundbox that announces successful payments, have continued to do well. The growing merchant GMV has also helped Paytm improve margins while reducing expenses.

The number of subscription-based merchant devices rose to an all-time high of 1.3 crore during the quarter. Paytm said it has been able to reduce capital expenditure by optimising device costs and increasing field sales productivity.

The company said it aims to serve over 10 crore merchants in India, with an expectation that 40–50 percent of them will eventually adopt subscription-based digital tools for managing their businesses.