One97 Communications Limited (OCL), which owns Paytm, recently released its financial results for the first quarter of FY25. Let’s delve into the key metrics and understand what they mean for the company’s future.
A mixed bag of numbers
Paytm reported an operating revenue of ₹1,502 Cr with an EBITDA loss of ₹792 Cr. The EBITDA before ESOP stood at a loss of ₹545 Cr.
Despite these losses, the company is optimistic about a rebound, citing improvements in merchant payment operating metrics like GMV, accelerated merchant reactivation, and a growing merchant base. They also remain focused on cost optimisation.
Segment-wise revenue
Revenue from financial services stood at ₹280 Cr, while marketing services brought in ₹321 Cr. The company’s contribution profit was ₹755 Cr with a 50% margin. This shows that despite the disruptions, certain segments are performing well, contributing significantly to the overall revenue.
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Cash reserves and stock acquisition rights
Paytm’s balance sheet remains robust with ₹8,108 Cr of cash on hand. They also hold stock acquisition rights in PayPay Corporation, amounting to a 5.4% stake once exercised. This strengthens their financial position and provides potential for future gains.
Merchant payment metrics and GMV
Merchant signups have returned to January 2024 levels, with a significant increase in the merchant subscriber base to 1.09 Cr. The daily average GMV (excluding disrupted products) has shown consistent improvement, nearing January 2024 levels.
The overall GMV for the June quarter was ₹4.3 lakh Cr, indicating month-on-month growth.
User base stability and cost optimisation
The total monthly transacting user base stabilised at ~7.8 Cr by the end of June. Paytm is awaiting permissions to onboard new UPI consumers, which could further boost their MTU base. They’ve also achieved a 9% reduction in employee costs quarter-on-quarter, aiming for annual savings of ₹400-500 Cr.
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Monetisation through financial products
Paytm is focusing on distributing loans, wealth products, and insurance. Their shop insurance offerings for merchants have found a strong market fit. On the consumer side, motor and embedded DIY insurance products are gaining traction.
They also offer differentiated health insurance products that combine Health Insurance, Health-care, and OPD benefits. Additionally, Paytm plans to diversify lending products and partners to expand secured lending products.
Stock market performance and predictions
Despite reporting an overall sequential de-growth in revenue of 32% for Q1 FY25, Yes Securities expects a decline in various segments: 40% in payments to consumers, 35% in payments to merchants, and 30% in financial services. Payment Processing Charges (PPC) revenues are projected to be 55.5% compared to 46% in Q4FY24 due to a UPI incentive received previously.
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Revenue decline and adjusted operating loss
Motilal Oswal Financial Services predicts a 36% YoY revenue decline to ₹1,490 Cr and a 51% YoY decline in contribution profit to ₹640 Cr. They estimate the gross merchandise value to decline by 7% YoY to ₹4.3 trillion.
The adjusted operating loss is expected to be around ₹490 Cr for Q1 FY25. Despite this, StoxBox maintains a positive outlook on Paytm, citing potential trend reversal patterns on technical charts.
The impact of rbi restrictions
The Reserve Bank of India (RBI) imposed restrictions on Paytm Payments Bank Limited (PPBL) in January, significantly affecting Paytm’s operations. The company had to write off ₹227.1 Cr of investment in PPBL, impacting its financials.
Conference call and market response
Paytm held its earnings conference call on July 19, 2024, discussing the financial results. Despite the reported losses, the company’s shares closed at ₹445.05, up 3.20% from the previous close.
Looking ahead
Paytm remains confident about its path to recovery, focusing on cost optimisation, expanding its merchant base, and diversifying its financial product offerings. However, the impact of RBI restrictions and revenue declines in major segments pose challenges.
Investors will need to watch for further developments and Paytm’s ability to navigate these hurdles.
