With our strong operating profitability ahead of the September 2023 guidance, we have achieved the milestone of EBITDA before ESOP by Rs 424 Cr YoY to Rs 31 Cr. This was due to sustained improvement in contribution profit and strong operating leverage while we made continued investments for long-term growth. Our EBITDA before ESOP margin stood at 2% of revenues as compared to (27%) a year ago.
Here is our Earnings Presentation for the quarter ending December 2022 and you can also read the full Q3FY23 financial results report here
Our Q3 FY 2023 results showed momentum across our operating and financial metrics. We have achieved this milestone without losing sight on growth opportunities and keeping all compliances as well as risk factors under strict watch. Addressing the analysts at the Earnings Call, our Founder, CEO & MD Vijay Shekhar Sharma said: “This quarter was a key benchmark to generate profit. Focus on monetization has allowed us to achieve this, and the team has done incredible work in the payment and credit business. This trend of generating sustained profits will continue, and we expect to grow to be a free cash flow generating machine.”
The core of our business model is to acquire customers and merchants for payment services and upsell them financial services by leveraging our distribution and collections. He further added: “Our focus on merchant payments instead of just consumer payments in the UPI payment model has led us to be a UPI revenue-generating company and build a scalable UPI model. Our pioneering device Soundbox led to significant scale in UPI acquiring.”
Talking about our loan distribution business, he said: “We’ve built a mature loan distribution business. Lending partners’ conviction and regulatory path give us the confidence of a pretty large profit pool ahead. An increase in digital payments increases the risk of frauds but Paytm will adhere to the right operational risk and be a benchmark in the country.”
Talking about the sustained revenue growth of the company, President & Group CFO Madhur Deora said, “Payment revenue surged 21% on a reported basis but like for like it’s 34%. Adj EBITDA is at 2% of revenue. This is sustainable going forward. We achieved operating EBITDA profit 3 quarters ahead of guidance. Through disciplined cost management and tons of operating leverage. This quarter we did not record any UPI incentive. Circular came in January versus December last year.”
As mentioned in our earnings release, in Q3 FY 2023, reported revenue grew by 21% YoY to Rs 1,197 Cr. On a like-for-like basis for UPI incentives, revenue growth would have been 34% YoY. Given the timing of the accrual of the UPI incentive, there was no UPI incentive recorded in this quarter. As per notification received from the Government on January 11, 2023, we estimate that for Q1-Q3 FY 2023, we will receive Rs 130 Cr of incentives in Q4 FY 2023
As a leader in offline payments, we now see the most acceleration in merchant lending and on the back of device growth, will continue to scale much higher. As device penetration keeps increasing, merchant loan distribution will continue to grow. “The no. of devices at 5.8 million gives massive growth and opportunity ahead. Potential for Merchant monetisation, stickiness, and merchant upsell,” Madhur said during the call.
Merchants are opting for our devices, whether Paytm card machines or Soundbox, on their counter and this adoption of devices by merchants is accelerating further. We have pioneered mobile payments in India, serving customers as well as small and large merchants. Our offering to the ecosystem is an innovative technology and the ultimate business solution that has become mainstream for the industry and the country.
Bhavesh Gupta, CEO of Lending and Head of Payments said, “Paytm Postpaid is the largest lending product accepted at 1.7 crore merchants. We see merchants wanting Postpaid on EDC and QR. Grown better than our guidance given last quarter at 30%. Personal loans are looking sharper year on year. Our Postpaid customers get 40% of personal loans. Credit quality and profitability continue to be better than the plan.”
On compliance, he said that Paytm is always upholding every regulation being laid down. Committed to making sure business stands strong on — Compliance, operational efficiency, and profitability, whereas Madhur added that we have laid out growth drivers for the company and said we have been able to achieve all of this without compromising on the scale and with a huge amount of focus on operational risk and compliance.
You can access the earnings call here