Strong Revenue Growth with Increased Monetization and Operating Leverage — Key Takeaways from our Earnings Call

Strong revenue growth with increased monetization and operating leverage — Key takeaways from our earnings call

With strong growth in revenues and contribution profit, combined with operating leverage, we have shown sharp improvement in EBITDA before ESOP costs. Our revenue from operations stood at Rs 1,914 cr and EBITDA before ESOP cost was at Rs (166) cr. Our Q2 FY 2023 results showed momentum across our operating and financial metrics.

Addressing the analysts at the Earnings Call, our Founder, CEO & MD Vijay Shekhar Sharma said, “We had a good quarter as the teams have performed well. We have acquired 80 million monthly transacting customers and have 30 million merchants. We have expanded into an online and offline omni-channel platform and our Commerce and Cloud services have also done well.”

He added, “We believe our payments stack, where we give merchants payment offerings and enable them with cloud and commerce services, makes for a scalable, large, profitable business model. Our financial services business model has an inherent compounding. We continue to believe the loan disbursement business will play an important role for democratizing credit.”

Talking about the growth in our other businesses, President & Group CFO Madhur Deora said, “We have seen platform expansion and increased monetization across businesses. Payments for us is profitable and there is a benefit from high margin loan distribution. We are proud of the fact that we continue to invest in our business – technology, sales and marketing. Despite increasing investments, which is important for long term growth, we are able to scale operating leverage.”

On improved EBITDA before ESOP cost margin, he mentioned that the margin has improved by 30% in past 1yr.

We see meaningful growth from online merchants primarily because of early festive sales and e-commerce. Net payment margin was up 5X YoY. We continue to focus on reduction of payment processing charges. Our primary focus in the payments business is to have profitable revenue as a metric.

Driven by sourcing and collection revenues in our loan distribution business, revenue in the Financial Services and others business is Rs 349 Cr, up 292% YoY (increased 29% QoQ), and now accounts for 18% of total revenue (versus 8% in Q2 FY 2022).

Bhavesh Gupta, CEO of Lending and Head of Payments said, “Our primary revenue comes from lending business. Our entire focus in lending business is aligned with RBI’s digital lending guidelines. There has been no disruption in the business. All three businesses – Paytm Postpaid, Personal Loans and Merchant Loans – are showing tremendous growth. Paytm Postpaid continues to demonstrate great penetration and is at 4% of our MTU, so we see headroom to grow and its growth will continue to be robust.”

You can access the earnings call here: https://ir.paytm.com/recordings?tag=fy2022-23/q2

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