Paytm reported its first operating gains in the December quarter but continues to report net losses on a consolidated basis. With the increasing competition in the digital payments market, analysts believe that maintaining EBITDA-level profitability will be critical today.
Paytm, the leading fintech company, achieved EBITDA level profitability (before ESOP costs) of Rs 31 crore in the December quarter, three quarters ahead of its estimate. EBITDA before ESOPs is a new-age statistic used by start-ups to determine operating earnings. Paytm, however, continues to be a loss-making business at a consolidated level. But it managed to narrow its consolidated net loss from Rs 778 crore in the December quarter of FY22 to Rs 392 crore in Q3 FY23.
Vijay Shekhar Sharma, Chairman, MD & CEO, Paytm, said in a statement to shareholders, “This has been made possible due to the relentlessly focused execution by our team. The team was asked to focus on growth with quality revenues that contribute to the bottom line.”
Paytm’s operational profitability increased as a consequence of its indirect expenditures (excluding ESOP costs) falling to 49% of revenues as a result of greater operating leverage. In the previous year, this figure was 58%. Furthermore, ESOP expenditures increased 32% from Rs 442 crore in Q3 FY22 to Rs 584 crore in the most recent quarter.
Analysts praised Paytm for attaining EBITDA profitability ahead of expectations, but cautioned that “sustaining it is critical.” “As of the conclusion of the third quarter, Paytm had an outstanding cash balance of Rs 89.57 billion ($1.1 billion). “Until February 3, 2023, Paytm repurchased 14.67 million shares for Rs 7.96 billion in cash, at an average price of Rs 543/share,” according to research by BoFA Securities.
The fintech platform’s revenue growth has been fueled by loan disbursements and a rise in merchant subscription purchases. Paytm’s revenue in Q3 FY23 was Rs 2,062 crore, up 42% from Rs 1,456 crore in Q3 FY22.
Paytm’s loan disbursement climbed 137% year on year to 10.5 million, while loan value increased 357% year on year to Rs 9,958 crore in Q3 FY23. In the same year, Paytm has also added 3.8 million new merchant memberships (Dec 2021 to Dec 2022).
“As of December 2022, 8.1 million borrowers have taken out a loan on our platform, adding 1.4 million new borrowers this quarter,” the company revealed in its earnings statement. “Growing borrower base offers tremendous upsell and lifecycle benefits. Our payments consumer and merchant base offers a large addressable market, thereby providing a long runway for growth,” it added.
Payment services remain at the heart of Paytm’s business, “supporting the acquisition as well as retention of customers and merchants in a cost-effective manner,” according to the firm. The fintech’s average monthly transacting users (MTU) increased to 85 million in the December quarter, a 32% year-on-year increase driven by client acquisition via UPI and new use cases.
Meanwhile, payment revenues increased by 21% year on year to Rs 1,197 crore in Q3 FY23. Revenue from merchant payments outweighed income from the consumer side. “Merchant subscriptions drive higher revenues and payment volumes while also serving as an appealing funnel for merchant loans,” the business added.
