Monetisation, vendor base expansion key themes of first Paytm earnings call

Revenue from operations up 64% YoY to Rs 1,090 crore in Q2FY22, driven by 52% growth in non-UPI payment volumes and over 3x in financial services and other revenue; net loss widens 11% to Rs 432 cr

Monetisation efforts and merchant based expansion were the key themes in the first earnings call financial services firm Paytm held with analysts over the weekend.

“I am very happy to say that our focus on monetisation has clearly been demonstrated in strong revenue growth that we are posting year-on-year in this quarter. Clearly, our platform leverage can be seen in increased contribution margin, better EBITDA margin, and continued growth in all key KPIs out there,” said  Vijay Shekhar Sharma, the company’s chairman, managing director and CEO on Saturday, during an analysts call after announcing second quarter results.

Revenue from operations grew by 64 per cent on a yearly basis to Rs 1,090 crore in Q2FY22, driven by 52 per cent growth in non-UPI payment volumes (GMV) and more than three times growth in financial services and other revenue.

The net loss widened 11 per cent to Rs 432 crore in the quarter ended September (Q2) on a year on year basis, and increased 28 per cent compared to the quarter ended June.

The company’s contribution profit grew to Rs 260 crore in Q2 FY 2022, year-on-year increase of 592 per cent. The adjusted EBITDA margin grew to 39 per cent in Q2 FY 2022 compared to 64 per cent the previous year.

This is an important metric as per the company. “I should point out that the company continues to make investments, and in some cases increased investments, in technology as well as merchant-based expansion. And we have been able to achieve reduction of EBITDA as a percentage of revenue, despite and along with these investments. So our focus would be to continue to make investments in areas that create a long-term expansion of profit pools,” said Paytm Group CFO and President Madhur Deora during the call.

Paytm’s management also laid out the key trends they have identified in their business for the July-September quarter, which included a sign of profitability coming in soon. “There is growth in payments revenue and profitability. This is due to growth of payment volumes from non-UPI instruments, including Paytm Payment instruments, that many of you are familiar with, as well as payment services to merchants. So growth on the consumer side as well as the merchant side. We are driving adoption of differentiated instruments. We are seeing recovery of high-margin commerce business, and growth of Cloud business. We are seeing an increase in Financial Services revenue driven by the huge ramp in Lending,” said Deora.

The company said its monthly transacting users (MTUs) increased by 14.4 million, Roughly, over a 12 month period, 60-80 per cent of Paytm's MTUs are new, and 20-40 per cent users are reactivated, Deora said during the call.

He further added that GMV, which is an indication of platform growth, reached Rs 2 lakh crore, which was up by 107 per cent year-on-year. “Many of you would recall that in the June quarter as well we grew more than 100 per cent year-on-year. So that is two consecutive quarters of platform growth of more than 100%, and this is really a function of users and merchants growing on the platform as well as increased engagement on the platform,” he said.

Paytm’s lending business saw loans disbursal growth of 714 percent year-on-year to over 2.8 million in Q2 FY 2022. The company’s financial institution partners disbursed around 1.3 million loans in October 2021, a 472 per cent increase in numbers of loans disbursed and aggregating to a total disbursal of Rs 627 crore, a 418 per cent increase in value of loans disbursed on a yearly basis.

And the company expects this to improve even further, in terms of the value of loans disbursed. “The opportunity to give credit through our platform with the help of our lending partners is so large that our focus is to expand the number of users who can get access to credit bid consumers and merchants and ticket size as an outcome which you rightly pointed out, as the book matures with our lending partners ticket sizes is a natural accretion that you will see on our platform. So in a nutshell, we…our focus is to expand the number of consumers and merchants who can get access to credit right. Ticket size is an outcome that we are necessarily not changing but we definitely see that ticket size will keep improving as it has  improved in the past on an incremental basis,” said Bhavesh Gupta, CEO of Paytm Lending.