Incredible financial services growth, stronger monetization puts us ahead of profitability plans: Paytm management


09 November 2022 18:54 STI

Noida (Uttar Pradesh) [India]Nov 09 (ANI): Leading Indian payments and financial services company Paytm reported strong growth in the second quarter of fiscal year 2022-23 (FY23), posting 76% year-on-year revenue growth Other (YoY), while contribution profit increased 224% year-on-year to Rs 843 crore, leading to contribution margin improvement of 44.1% in Q2 revenue. fiscal year 2022-23 (Q2FY23).
The company saw stronger monetization across all of its key businesses while containing overhead, resulting in a 61% year-over-year improvement in operating profit or Ebitda before the employee stock ownership plan (ESOP). ) only costs Rs 166 crore.
Reflecting on Q2FY23’s strong overall performance in an earnings call held on Wednesday, Paytm management – Vijay Shekhar Sharma, Chairman, Managing Director and Chief Executive Officer (CEO); Madhur Deora, group chief financial officer and chairman, and Bhavesh Gupta, CEO of offline lending and payments, said the company remained ahead of its profitability plans. However, the company maintained its guidance and expressed confidence in the September 2023 operating balance target.
Vijay Shekhar Sharma said that Paytm had acquired 80 million monthly transacting users while its merchant base had grown to almost 30 million. He added that it had now become an “online omnichannel” platform, with payments at the heart of operations. Paytm’s overall payment service revenue grew 56% year-on-year, while payment net margin increased more than 400% to Rs 443 crore. Sharma added that the company’s business operations have also achieved profitability.
Explaining Paytm’s successful business model, Sharma said, “We believe that our payments stack, where we provide merchants with payment offerings and then offer them cloud and commerce services, is a scalable, expansive business model. and profitable.”
Strong T2FY23 performance puts Paytm ahead of profitability plans
Several analysts during the call mentioned that the speed at which Paytm is improving Ebitda before ESOP costs could allow the company to hit its breakeven target ahead of forecasts.
Madhur Deora, group chief financial officer and chairman, said Paytm was on track to reach operational breakeven by September 2023, adding that the company was currently “ahead” of the plan. “We have given guidance to reach breakeven by September 2023, we are ahead of our plans but we would like to maintain these guidance,” he said.
Highlighting the improvement in operating leverage, he added, “We had a very good quarter. We are just below a $1 billion run rate. Significant change in contribution profit during of the past 12 months. Our Ebitda before ESOP cost is starting to see operating leverage kick in.”
“We are very proud of the fact that we continue to invest in our business – technology, sales and marketing. Despite increased investment, which is important for long-term growth, we are able to increase leverage exploitation,” he added.
Deora further pointed out that Paytm has seen strong platform expansion and increased monetization in key businesses, adding that “payment is profitable” and “there is an upside to high-margin loan distribution.” .
Financial services are seeing ‘incredible growth’
Paytm’s loan distribution business in partnership with major financial institutions also saw increased momentum this quarter, with disbursements reaching an annualized run rate of Rs 34,000 crore. Paytm disbursed 9.2 million loans (up 224% YoY and 8% YoY) during Q2FY23, amounting to Rs 7,313 crore (up 482% YoY and 32% quarter-on-quarter). This was the main contributor to the company’s financial services segment, which contributed 18% of total revenue in the second quarter.
Regarding Paytm’s financial services business model, Vijay Shekhar Sharma noted that there had been “incredible” year-on-year growth, but said it represented a “very small fraction” of the customer base. “There is incredible room for growth. We continue to believe that loan disbursement activity will play an important role in democratizing credit,” Sharma added.
Elaborating on Paytm’s lending distribution business, Bhavesh Gupta, CEO of Offline Lending and Payments, said, “We are pleased to report that our lending business has not experienced any disruption following the directives of the RBI (Reserve Bank of India) on digital lending and the three companies showing tremendous growth.”
He said Paytm Postpaid continues to demonstrate high merchant penetration and has the highest acceptance of any credit instrument in the country. He added that Paytm Postpaid has enough room for growth as it has a penetration of 4% in terms of monthly tracked users (MTU).
Gupta also pointed out that Paytm Postpaid was a key driver of personal loan adoption, as more than 40% of such disbursements in Q2FY23 came to existing Paytm Postpaid users. He added that customer acquisition is unlikely to slow down in the next few years.
He also pointed out that merchant lending also saw strong momentum in merchant credit research, supported by strong device growth. “This quarter, the growth has been absolutely blistering. With good device growth, we will see a big boost in merchant lending over the next few quarters,” Gupta said, adding that there are 1.5 million of merchants who are pre-qualified for loans worth up to $2 billion. (ANI)


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