Paytm Q2 result: Fintech posts PAT at ₹930 crore on exceptional gain vs loss YoY; 5 key highlights

Paytm Q2 result: Paytm parent One 97 Communications on Tuesday reported a profit after tax (PAT) of ₹930 crore for the September quarter, benefitting from a one-time exceptional gain of ₹1,345 crore from the sale of its entertainment ticketing business,

The company said it achieved 11 per cent quarter-on-quarter (QoQ) revenue growth due to a 5 per cent QoQ increase in GMV, better realisation from devices and a 34 per cent QoQ increase in revenues from financial services.

"Our net payment margin increased 21 per cent QoQ to ₹465 crore, largely due to improvement in payment processing margin, better device realisation and growth in GMV (gross merchandise value). Financial Services revenue was ₹376 crore, up 34 per cent QoQ, on account of increase in collection bonus in merchant loans due to better asset quality trends, and higher share of merchant loans," Paytm said in an exchange filing.

"With even greater confidence in our merchant loan distribution business, where we help in distribution and collection, we have started working with select lenders by giving the Default Loss Guarantee (DLG) for select portfolios. In the long-term, this will allow us to serve a wider merchant base and increase our financial services distribution revenue," said Paytm.

In a post-earnings call with analysts, Paytm founder Vijay Shekhar Sharma said the company was becoming more disciplined in terms of costs.

"UPI incentives have helped on costs front. As other factors like AI advances, we will become more cost efficient. The models and costs deployed will become phenomenally low," Sharma said during the call. He added that the company had reduced its staff strength by 60% over the previous 10 months.

"We continue to find optimization opportunities on the costs front and we continue to find many areas as possible," Madhur Deora, Paytm's chief financial officer, said in the call.

"Implementation of AI across businesses has helped us bring down employee cost by 23% from Q3 FY 2024 while improving efficiencies and making us leaner," said Sharma. He added that the company has significantly boosted the productivity of its tech teams by adopting AI.

Moving forward, Sharma said that cost discipline will remain a key focus area. However, the company plans to continue investing in sales employees and marketing to drive growth among merchants and consumers.

Sharma said the company was focused on reducing capital expenditure by retrieving inactive merchant payment devices, refurbishing them, and redeploying them to new merchants. 

While this process would temporarily reduce Paytm's merchant count, the company plans to redeploy these devices over the next two to three quarters, which is expects will result in a larger active merchant base and higher revenue.

Sharma also highlighted new monetization opportunities emerging from the company's Soundbox devices, with Paytm piloting advertisements that seamlessly integrate branding between companies and consumers. The company has already partnered with brands such as Meesho, Coca-Cola, Mondelez, and Dabur to test this feature.

For the second quarter, indirect expenses (excluding ESOP cost) were ₹1,080 Cr, down 17% QoQ, primarily on reduction of non-sales employee costs, cost efficiencies across businesses and absence of certain one-off expenses.

Paytm's share price cracked almost 8 per cent after the company announced its Q2 result. At the end of trading on Tuesday, Paytm's shares were down by about 6% at ₹684 apiece.

Let's take a look at 5 key highlights from Paytm's Q2 scorecard:

PAT comes on one-time gains; revenue rises QoQ

For Q2FY25, Paytm posted a consolidated profit of ₹930 crore against a loss of ₹291.7 crore in the corresponding quarter last year. In Q1FY25, the company had suffered a loss of ₹840.1 crore.

An exceptional gain of ₹1,345 crore due to the sale of the entertainment ticketing business helped Paytm report a profit for the last quarter.

Sequentially, the company's revenue rose by 10.5 per cent; in Q1FY25, Paytm's revenue was ₹1,501.6 crore. Growth in payments and financial services increased revenue quarter-on-quarter.

Payment services revenue of ₹981 crore increased by 9 per cent QoQ, while revenue from financial services and others was ₹376 crore, up 34 per cent QoQ.

On the other hand, on a year-on-year (YoY) basis, the company's revenue from operations declined 34.11 per cent to ₹1,659.5 crore for the quarter under review. In the same quarter last year, the company's revenue was ₹2,518.6 crore.

EBITDA improves sequentially

The company said due to revenue growth, contribution margin improvement and indirect cost reduction, its EBITDA for the quarter improved by ₹388 crore QoQ but still remained negative at ₹404 crore. In the June quarter of the current financial year, the company reported an EBITDA of - ₹792 crore.

Before ESOP, EBITDA for Q2FY25 improved by ₹359 crore QoQ, coming at - ₹186 crore.

The company said it is committed to reaching EBITDA before ESOP profitability by Q4FY25.

Indirect costs decline

Paytm said its indirect costs came down during the quarter by 17 per cent QoQ to ₹1,080 crore due to reduced employee costs (down 13 per cent QoQ), marketing expenses and the absence of certain one-time expenses incurred in Q1FY25.

GMV, payment processing margin improve

According to the exchange filing, in Q2FY25, the company's GMV was ₹4.5 lakh crore, up 5 per cent QoQ. The company said it managed to significantly improve payment processing margin last quarter and expects payment processing margin (including UPI incentive) to be in the range of 5-6 bps for the year.

Personal loan value declines

The value of personal loans distributed in Q2FY25 declined to ₹1,977 crore versus ₹2,500 crore in Q1FY25 due to lenders' tightening risk policies.

"We continue to expand partnerships with banks and non-banks. We see a long-term opportunity in this space as (a) our lending partners will want to increase distribution when the credit cycle eases, (b) we will continue to add more partners, and (c) an increase in MTU (monthly transacting users) will improve the funnel further.

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