Our Q2 FY 2023 results indicate healthy traction across all our businesses, continuing the momentum witnessed in the previous quarter. Sustained revenue growth of 76% YoY led to expansion in contribution profit, and indirect expenses were flat sequentially. As a result, there was a sharp improvement in EBITDA before ESOP costs by 61% YoY — (Rs 166 Cr) in Q2 FY2023 vs( Rs 426 crore) in Q2 FY2022.
In Q2 FY 2023, our revenue was Rs 1,914 Cr, up by 76% YoY with growth in lending, expansion in merchant subscriptions driven by accelerated device deployments, and momentum in commerce and cloud with growth in advertising, resumption of ticketing volumes, credit cards and PAI cloud.
Our contribution profit for the quarter stood at Rs 843 Cr, an increase of 224% YoY and 16% QoQ. Our contribution margin increased to 44% (as % of revenue) from 24% in Q2 FY 2022. During this period, we have driven (a) improvement in net payment margin in our payments business; and (b) increased mix of high margin businesses such as Loan distribution.
Indirect costs were Rs 1,010 Cr in the quarter, flat vs previous quarter’s Rs 1,001 Cr. We continue to make disciplined investments in areas where we see attractive monetization opportunities, including (a) sales team to increase our merchant base and our merchant subscriptions, (b) investments in our technology teams, (c) targeted marketing for user acquisition and brand. For eg, our investments in our sales team is currently at Rs 172 Cr per quarter (compared to Rs 94 Cr per quarter a year ago). At the same time, due to increase in contribution profits, and our discipline on costs, we are witnessing significant operating leverage (indirect expenses is at 53% of revenues in the quarter, down from 60% in Q1 FY 2023 and 63% in Q2 FY 2022).
As a result of continued focus on improving monetization capabilities, widening contribution margin as well as significant operating leverage, our EBITDA before ESOP cost stood at (Rs 166) Cr, improving 61% YoY. Since we shared our operating breakeven guidance in April 2022, we have been able to drive a Rs 201 Cr improvement in EBITDA before ESOP cost, and continue to maintain the guidance of turning profitable by September 2023.
Payments Services Revenue Grew 56% YoY and our Net Payment Margin Grew by Over 400%, on Back of Platform Expansion
Revenue from payment services to consumers stood at Rs 549 crore, an increase of 55% YoY, while payment services to merchants was Rs 624 crore, marking an increase of 56% YoY. We have not recorded any UPI incentive this quarter as well.
Driven by improved monetization and continued focus on reduction in payment processing charges, Paytm’s net payment margin (calculated as payments revenues plus other operating revenues, less payment processing cost) stood at Rs 443 Cr, increasing 15% QoQ and was up 428% YoY.
Loan Distribution: Under-penetrated; ample Growth Opportunity at Attractive Profitability
Revenue in the Financial Services business was Rs 349 Cr, up 293% YoY (increased 29% QoQ), and now accounts for 18% of total revenue (versus 8% in Q2 FY 2022), driven by sourcing and collection revenues in our loan distribution business.
Total loans disbursed, in partnership with our lending partners were 9.2 mn in the quarter (up 224% YoY and 8% QoQ), amounting to Rs 7,313 Cr (up 482% YoY and 32% QoQ). Disbursements in our loan distribution business are now annualizing at a run-rate of about Rs 34,000 Cr
Our collections efforts continue to deliver good performance, with indicative portfolio performance across loan products holding up well. We continue to seek growth & upsell opportunities as low penetration supports future growth potential, while working with our lending partners to maintain healthy credit quality.
Sustained Growth in Commerce & Cloud Business
Commerce & Cloud revenues grew 55% YoY. Commerce revenue grew 49% YoY due to higher ticketing sales. Cloud revenues were up 58% YoY as Advertising revenues started recovering while Credit card revenues continue to scale as well.
We remain grateful for your continuous support, and remain committed to our mission to to building a profitable company and create shareholder value, while driving digitization and inclusive financial access
You can read the full Q2FY23 financial results report here