Payments and Financial Services as Core Revenue and Growth Drivers, Emphasis on Quality Revenues and Risk Management — Key Takeaways From Our Q4 FY 2023 Earnings Call

We have had a landmark fiscal year where we achieved operational profitability (EBITDA before ESOP) during the second half of the year. In Q4 FY 2023, our revenue surged 51% YoY to ₹2,334 Cr and EBITDA before ESOP cost expanded from the previous quarter to ₹234 Cr (including full-year UPI incentive). We believe we can continue our growth momentum and improve our profitability further.     

Addressing the analysts at the Earnings Call, our Founder, CEO & MD Vijay Shekhar Sharma said Paytm is aiming for positive Free Cash Flow with a focus on quality revenues. “We are indebted to the business team’s attention and efforts which delivered our success. We have added more leadership positions, and India is offering incredible opportunities”.

Here is our Earnings Presentation for the quarter ending March 2023 and you can also read the full Q4FY23 financial results report here

As of Q4 FY 2023, our registered merchant base stands at 3.35 crore, growing 25% YoY. “I believe UPI has started going towards monetization. Our payment team has done great market penetration. We are very proud to say that when it comes to the merchant, where a consumer makes payment to the merchant, Paytm is the market leader here,” shared Mr. Sharma, while pointing out that as our revenues grow, the margin also continues to improve.

Incentives from the government for UPI and subscription revenue from merchants are driving our payments business. As of April 2023, 71 lakh merchants pay us subscriptions for our payment devices like Paytm Soundbox and POS machines. Talking about the sustained revenue growth of the company,  President and Group CFO Madhur Deora takes over. “We recorded annual revenue growth of 61% and a 100% increase in UPI incentive from Rs 90 crore in FY22 to Rs 182 crore in FY23. Our performance was extremely strong, as for the quarter, revenue was Rs 2,334 Cr, marking 51% growth YoY.”

We have seen huge technology adoption by our merchants and expect the pace of deployment of 1 million devices per quarter to continue and even go up. “Our net payments margin has been a continuous improvement story, we focus on monetizing payments better while keeping costs under control,” said Mr. Deora.

Commenting on our financial services business, Chief Operating Officer Bhavesh Gupta said Paytm has recorded growth across all lending segments and the company will see more secular growth across all three products. “Our focus is not just on volume but also the quality of loans and that each individual line of business is growing,” said Mr. Gupta, adding that Personal Loans and Merchant Loans are very profitable for Paytm as well as our lending partners. 

“The penetration for loans remains low  in Paytm’s MTU remains low and the runway for growth is significant. We continue to grow while also being selective of the loans being disbursed,” shared Mr. Gupta. We are seeing good growth in loan distribution with much better portfolio performance than expected by our lending partners. 

In the Cloud and Commerce business, we offer travel, events and movie ticketing as well as co-branded credit cards, advertising, marketing and loyalty solutions. 

“Our co-branded credit card distribution is scaling well with 5.9 lakh cards activated as of March 2023, an increase of 1.4 lakh cards during the quarter. The business is scaling in both new issuances and spends per card,” said Mr. Deora.

Our Founder and CEO Vijay Shekhar Sharma said the amount of love we get from merchants for our legendary Made-in-India Paytm Soundbox is incredible. “Because of our cost, service and industry-best features, we grow even as we charge for devices despite others trying to offer devices for free. Competition in this space has only increased the opportunity for us to grow in the market for Paytm Soundbox,” Mr. Sharma said.

We have made significant investments towards sales manpower, improvement of the technology platform, marketing spends etc., which will help us carry this growth momentum. We recently launched our new technology platform, built with 100% indigenously developed technology and capable of carrying out 10x more transactions than the current scale. Our 4G-enabled Soundbox 3.0, Paytm UPI LITE, wallet interoperability through UPI going live are some of the growth drivers in our business.