Paytm narrows Q3 loss, revenue jumps 38%

In line with expectations, Vijay Shekhar Sharma-led Paytm has reported a reduction in losses and a significant jump in revenue in the October-December quarter of the fiscal year 2023-24.

The Noida-headquartered fintech major reported 38% YoY revenue growth in Q3 FY24, driven by accelerated GMV growth, device addition, and financial services business. Paytm parent One97 Communications' revenue surged to ₹2,851 crore in the third quarter compared to ₹2,062 crore in the year-ago period.

The company's net loss for the period improved by ₹170 crore year-on-year to ₹222 crore from ₹392 crore loss in the year-ago period.

Paytm’s net payment margin also improved 63% YoY to ₹748 crore in Q3 due to an increase in payment processing margin and an increase in merchant subscription revenues.

Paytm's Q3 FY2024 EBITDA before ESOP increased ₹188 crore YoY to ₹219 crore from ₹31 crore in the year-ago period.

Revenue from payment services surged 45% YoY to ₹1,730 crore, partly boosted by the timing of the festive season while the net payment margin surged 63% YoY to ₹748 crore.

The gross merchandise value rose 47% YoY to ₹5.1 lakh crore, and the payment processing margin, without UPI incentive in the quarter, is in the 7-9bps range, says Paytm. Paytm says merchants paying subscriptions for devices have reached 1.06 crore as of December 2023, an increase of 49 lakh YoY. "Strong device growth is also fueling growth in GMV, which helps us drive payment processing revenue."

Paytm app's average monthly transacting users (MTU) for Q3 FY2024 grew 18% YoY to 10 crore. The company says the growth in GMV was partly boosted on account of the timing of the festive season as most of the online sales in this financial year were in Q3, whereas in the previous financial year, they started in Q2.

In the financial services business, Paytm's revenue from financial services and others went up 36% YoY to ₹607 crore. The loan distribution was up 56% YoY to ₹15,535 crore. The amount, however, is 4% lower from the last quarter as Paytm says it’ll continue to calibrate the distribution of postpaid loans amid the macro uncertainty and regulatory guidance.

Apart from approving the Q3 FY24 results, the One97 board today approved the execution of a joint development agreement between the company and ACE Builders and Promoters Private Ltd whereby ACE will raise the requisite capital to develop an IT/ITES complex on a 10-acre plot in Sector 159, Noida, allotted to Paytm in March 2018 (pre-IPO) by the New Okhla Industrial Development Authority (Noida). The total development cost estimated to be incurred by ACE is ₹750 crore.

The board also approved the incorporation of a wholly owned subsidiary at the GIFT International Financial Services Centre (IFSC), Gandhinagar.

The Paytm share closed 2.55% up at ₹773.90 on the BSE today. Notably, UBS on January 16 had initiated its coverage on the Paytm stock, saying that the company is finding its "footing". "Paytm's strong top-line CAGR of 54% in FY21-24E has been driven by its core payment business and supported by device and loan origination monetisation. Its profitability dynamics have also improved," says UBS. It viewed EBITDA break-even and EBITDA growth as a "key re-rating trigger" and initiated coverage with a "Buy" rating and a ₹900 price target.