'Robust business model driving increased monetisation,' says Paytm in Q3FY23 update
Paytm’s robust business model has created a two-way ecosystem through which it offers payment services to consumers and merchants and then distributes loans, says the fintech major
- Jan 14, 2023,
- Updated Jan 14, 2023 6:03 PM IST
Fintech major Paytm said the compounding nature of its key businesses is powering it towards profitability as is reflected in its latest operating update for the quarter ending December 2022.
Paytm’s robust business model has created a two-way ecosystem through which it offers payment services to consumers and merchants and then distributes loans. The company remains the market leader in offline payments with 5.8 million devices deployed," said the Noida-headquartered company.
With a growth of 32% YoY, user engagement on Paytm Super App’s also continues to grow with average monthly transacting users (MTU) at 85 million for the quarter ended December 2022. Paytm’s merchant payment volumes (GMV) for the quarter ended December 2022 stood at Rs 3.46 lakh crore ($42 billion), a growth of 38% YoY.
Commenting on the operating performance, ICICI Securities’ Kunal Shah said, “GMV grew 7%/9% MoM/QoQ in Dec 2022 to Rs 1.2 lakh crore/Rs 3.5 lakh crore. FY23YTD GMV stood at Rs 9.6 trillion. Management’s focus over the past few quarters continued to be on payment volumes that generate profitability either through net payment margin or from direct upsell potential. We are building an estimate of Rs 13.6 trillion GMV in FY23E.”
Increasing growth is also seen in Paytm’s credit business wherein it distributes loans in partnership with top financial institutions. Loan disbursements in December alone grew 330% YoY with loan disbursal worth Rs 3,665 crore. Total disbursements for three months ended December 2022 grew 357% YoY to Rs 9,958 crore. 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 ended December 2022.
“With increasing GMV and lending business along with some increase in commerce and business, we estimate 11% QoQ operating revenue growth in Q3FY23E. This along with focus on improving its operating profitability, we expect its some direct expenses to decline sequentially and employee expenses (excl. ESOP) to be more or less flat which should improve its adjusted EBITDA (EBITDA before ESOPs),” said Shah.
Research form BofA in a recent note estimated that Paytm will have a better-than-expected adjusted
EBITDA losses in the third quarter of the fiscal and it will post 1% QoQ revenue growth versus 14% in July-September 2022. "Indeed on the back of this, we expect Paytm's adjusted EBITDA losses to reduce to Rs 100 crore (from Rs 160 crore in the second quarter of the fiscal). This would translate to adjusted EBITDA margin of (-)6% as compared to (-)9% in July-Sept quarter, bringing Paytm a step closer to profitability,” analysts at BofA added.
With a strong operating performance, Paytm is on its path of achieving EBITDA profitability by quarter ending September 2023 despite continued investments in sales, technology and marketing. In Q2FY23, the company reported a sustained revenue growth at Rs 1,914 Cr and a sharp improvement in EBITDA before ESOP cost by Rs 108 crore QoQ. The company’s net losses reduced 11% on a quarterly basis.
Fintech major Paytm said the compounding nature of its key businesses is powering it towards profitability as is reflected in its latest operating update for the quarter ending December 2022.
Paytm’s robust business model has created a two-way ecosystem through which it offers payment services to consumers and merchants and then distributes loans. The company remains the market leader in offline payments with 5.8 million devices deployed," said the Noida-headquartered company.
With a growth of 32% YoY, user engagement on Paytm Super App’s also continues to grow with average monthly transacting users (MTU) at 85 million for the quarter ended December 2022. Paytm’s merchant payment volumes (GMV) for the quarter ended December 2022 stood at Rs 3.46 lakh crore ($42 billion), a growth of 38% YoY.
Commenting on the operating performance, ICICI Securities’ Kunal Shah said, “GMV grew 7%/9% MoM/QoQ in Dec 2022 to Rs 1.2 lakh crore/Rs 3.5 lakh crore. FY23YTD GMV stood at Rs 9.6 trillion. Management’s focus over the past few quarters continued to be on payment volumes that generate profitability either through net payment margin or from direct upsell potential. We are building an estimate of Rs 13.6 trillion GMV in FY23E.”
Increasing growth is also seen in Paytm’s credit business wherein it distributes loans in partnership with top financial institutions. Loan disbursements in December alone grew 330% YoY with loan disbursal worth Rs 3,665 crore. Total disbursements for three months ended December 2022 grew 357% YoY to Rs 9,958 crore. 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 ended December 2022.
“With increasing GMV and lending business along with some increase in commerce and business, we estimate 11% QoQ operating revenue growth in Q3FY23E. This along with focus on improving its operating profitability, we expect its some direct expenses to decline sequentially and employee expenses (excl. ESOP) to be more or less flat which should improve its adjusted EBITDA (EBITDA before ESOPs),” said Shah.
Research form BofA in a recent note estimated that Paytm will have a better-than-expected adjusted
EBITDA losses in the third quarter of the fiscal and it will post 1% QoQ revenue growth versus 14% in July-September 2022. "Indeed on the back of this, we expect Paytm's adjusted EBITDA losses to reduce to Rs 100 crore (from Rs 160 crore in the second quarter of the fiscal). This would translate to adjusted EBITDA margin of (-)6% as compared to (-)9% in July-Sept quarter, bringing Paytm a step closer to profitability,” analysts at BofA added.
With a strong operating performance, Paytm is on its path of achieving EBITDA profitability by quarter ending September 2023 despite continued investments in sales, technology and marketing. In Q2FY23, the company reported a sustained revenue growth at Rs 1,914 Cr and a sharp improvement in EBITDA before ESOP cost by Rs 108 crore QoQ. The company’s net losses reduced 11% on a quarterly basis.