Indian fintech Paytm has come a long way from a simple mobile recharge platform to emerge as a leader in payments and financial services. The compounding nature of its core businesses is propelling the fintech giant towards profitability, as reflected in its latest operating update for the quarter ending December 2022. It is also paving a way for other fintech players in the industry.
Paytm has created a two-way ecosystem through which it provides payment services to consumers and merchants and then disburses loans. The company continues to be the market leader in offline payments with 5.8 million devices deployed. With a growth of 32%, user engagement on the Paytm Super app is also on the rise with Average Monthly Transactional Users (MTU) rising to 85 million for the quarter ending December 2022. Paytm’s merchant payment volume (GMV) for the quarter ending December 2022 at ₹3.46 lakh crore ($42 billion), a growth of 38% YoY.
Commenting on the operating performance, Kunal Shah of ICICI Securities said, “GMV grew by 7%/9% MoM/QoQ to ₹1.2tn/₹3.5tn in Dec’22. FY23YTD GMV stood at ₹9.6tn. Over the past few quarters, management’s focus has been on the volume of payouts that generate profitability from net payout margin or direct upsell potential. We are estimating ₹13.6tn GMV in FY23E.
Read also: Alibaba sells nearly half of its direct stake in Paytm for Rs 535.9 per share
Paytm’s credit business is also seeing growth wherein it disburses loans in partnership with top financial institutions. Loan disbursement grew by 330% in December alone with loan disbursement of ₹3,665 crore. Total disbursements increased by 357% to ₹9,958 crore for the three months ending December 2022. The number of loans grew 117% YoY to 3.7 million for the month of December, and 137% YoY to 10.5 million cumulative loans for the three months ending December 2022.
“With growth in GMV and lending business along with some growth in commerce and business, we forecast 11% QoQ operating revenue growth in Q3FY23E. As it continues to focus on improving its operating profitability, we expect some of its direct expenses to decrease sequentially and staff
Expenses (excluding ESOPs) should be more or less flat which should improve its adjusted EBITDA (EBITDA before ESOPs),” said Shah.
Research form BofA in a recent note forecast that Paytm would post a better-than-expected EBITDA loss in the third quarter of the fiscal and post 1% QoQ revenue growth versus 14% in July-September 2022.
“In fact on the back of this, we expect Paytm’s adjusted EBITDA loss to narrow to ₹1bn (from ₹1.6 bn in Q2 FY19). This will be (-)6% compared to adj. EBITDA margin (- ) 9% in the July-September quarter, to bring Paytm closer to profitability,” said analysts at BofA.
Read also: Paytm helps users avoid around 1.6 billion trips to ATMs, NCR becomes digital payments capital
Paytm MD and CEO Vijay Shekhar Sharma has been asserting that Paytm is on track to achieve EBITDA profitability by the quarter ending September 2023, despite continued investments in sales, technology and marketing. In Q2FY23, the company registered a sustained revenue growth of ₹1,914 crore and a sharp improvement in EBITDA before ESOP cost by ₹108 crore QoQ. The company’s net loss decreased by 11% on a quarterly basis.