Inside Paytm’s Q3 Results: Loss Narrows To INR 222 Cr, Loan Disbursals See QoQ Decline

Fintech juggernaut Paytm’s parent, One97 Communications, on Friday (January 19) reported the financial results for the third quarter (Q3) of the fiscal year 2023-24 (FY24). Here are the key takeaways: 

Headline Numbers: Paytm continued to trim its loss. In Q3 FY24, the fintech major slashed its net loss by 43% to INR 222 Cr from INR 392 Cr during the corresponding period last fiscal. 

Sequentially, net loss declined 24% from INR 292 Cr in Q2 FY24. 

Paytm’s operating revenue rose to INR 2,850 Cr in the quarter ending December 2023, up 38% from INR 2,062 Cr in Q3 FY23. On a quarter-on-quarter (QoQ) basis, it jumped 13%. 

The company attributed this jump to rise in gross merchandise volume (GMV), higher device addition and the growth of its financial services business during the quarter. Festive season also ‘partly’ boosted the company’s revenues in Q3 FY24. 

The fintech major’s total expenses surged 27.5% year-on-year (YoY) to INR 3,216.3 Cr in Q3 FY24.

Slowdown In Loans Business: While loan distribution business powered Paytm’s growth over the last few quarters, the vertical saw a sequential decline in Q3 FY24. This was on expected lines following the company’s recalibration of its loan portfolio towards the end of Q3. 

Revenue from financial services, which includes loan distribution business, grew 36% YoY to INR 607 Cr in Q3 FY24. Sequentially, it clocked a modest 6% growth. 

The number of loans disbursed declined 12% QoQ to 1.15 Cr in Q3 FY24 as against 10% YoY growth. The number of loans receded back to Q4 FY23 levels, implying that the recalibration exercise had set the company back by a few quarters.

Paytm disbursed loans worth INR 15,535 Cr in Q3 FY24, up 56% YoY but down 4% sequentially. 

As lending growth dries up, Paytm now plans to prioritise insurance distribution, equity broking and mutual funds distribution. The company also said it sees a big opportunity in the high-ticket loan business and that it disbursed INR 490 Cr of such loans.

Zooming Further Into Lending Business: The merchant loans segment saw healthy growth, with loan disbursals rising 96% YoY to Rs 3,579 Cr in Q3 FY23. On a QoQ basis, the growth stood at a modest 10%.

On the other hand, average ticket size for merchant loans jumped to INR 2 Lakh from INR 1.5 Lakh in the previous quarter. However, the number of loans remained flat QoQ at 1.8 Lakh.

Interestingly, more than 85% of the loans distributed during the quarter were availed by Paytm’s subscribed merchants. Even as the repeat rate stood at nearly 50%, penetration for the merchant loans business hovered around the 6.1% mark of all device merchants.

Meanwhile, personal loan disbursals jumped 52% YoY to INR 4,460 Cr in Q3 FY24. Sequentially, it rose 13%. 

The average ticket size for personal loans rose to INR 1.68 Lakh from INR 1.2 Lakh. This comes even as penetration in personal loans was at a mere 1.1% of the monthly transacting users.

Paytm Eyes Profitability: The fintech clocked its fifth consecutive adjusted EBITDA, or EBITDA before ESOP costs, positive quarter. 

Adjusted EBITDA surged to INR 219 Cr in the December quarter from INR 31 Cr in the year-ago period on the back of healthy growth and operating leverage.

Meanwhile, ESOP costs jumped 5% YoY to INR 378 Cr in Q3 FY24.

Paytm Continues To Woo Merchants: The number of merchants registered with the fintech major jumped to 3.93 Cr, up 25% from 3.14 Cr during the same period last fiscal year. 

These merchants processed 999 Cr transactions in the quarter under review, up 59% YoY from 628 Cr in Q3 FY23. At the end of December 2023 quarter, the number of Paytm payment devices deployed at shop counters stood at 1.06 Cr, up from 58 Lakh in Q3 FY23. 

Paytm’s GMV Continues To See Uptick: The payments vertical continued to be the growth engine of Paytm as it clocked a GMV of INR 5.10 Lakh Cr in Q3 FY24, up 47% from INR 3.46 Lakh Cr in the year-ago period. 

Alongside, total number of transactions on Paytm zoomed 55% YoY to 1,185 Cr in the period under review. 

Meanwhile, average monthly transacting users (MTUs) stood at 10 Cr in Q3 FY24 as against 8.5 Cr in Q2 FY24.

Focus On AI-Led Efficiencies: The company reiterated its plans to accelerate the adoption of artificial intelligence(AI), saying that the technology enables it to deploy more features at a faster speed. The company expects its AI-first approach to drive operating leverage across various functions, including business and operations.

“With AI delivering significant efficiencies by automating a large spectrum of workflows, we expect significant operating leverage from employee costs going forward,” said Paytm in a statement.

In addition, Paytm aso claimed that it does not expect marketing costs to vary across the coming quarters due to seasonal factors such as IPL and festive season, and projects its indirect expenditures to grow at a slower pace in the next few quarters.

Update On Payments Bank Missing: What was missing in Paytm’s Q3 FY24 investor presentation was the quarterly update on its ongoing engagement with the RBI regarding restrictions on onboarding new customers for its payments bank, Payments Bank Limited (PPBL).

In March 2022, the central bank banned the payments bank from entertaining any new customers over ‘certain material supervisory concerns’. 

There was also no comment on the online payment aggregator licence sought from the RBI, even as the central bank has barred Paytm Payments Services Limited (PPSL) from onboarding new online merchants.

Shares of Paytm ended today’s trading session 2.55% higher at INR 773.90 on the BSE. The company released the Q3 numbers after market hours.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.