Paytm’s Digital Payments Business Sees Resurgence
India’s leading digital payments company, Paytm, has reported a significant reduction in its third-quarter adjusted loss, thanks to a strong recovery in its digital payments business. The company’s loss before exceptional items and tax stood at 2.04 billion rupees ($23.6 million) for the quarter ended December 31, a substantial improvement from the 4.07-billion-rupee loss in the previous quarter.
Revenue Growth Driven by Financial Services
Paytm’s revenue from operations saw a 10.1% sequential growth, reaching 18.28 billion rupees. The company’s financial services segment, which includes its loan business, witnessed a remarkable 34% growth, while its payment services business jumped 8%. This growth can be attributed to the company’s efforts to diversify its revenue streams and reduce its dependence on a single business unit.
Regulatory Hurdles Behind Us
The Reserve Bank of India’s decision to wind down Paytm’s banking unit in January 2024 had raised concerns about the company’s digital payments business. However, Paytm’s latest results suggest that the company has largely overcome these regulatory hurdles. “Paytm’s fundamentals are improving, and it seems like the regulatory hurdles are largely behind us,” said Rahul Jain, vice president – research, at Dolat Capital.
Expenses Under Control
Paytm’s expenses fell 31% year-on-year and 1% sequentially, mainly due to lower marketing and employee-related costs. This reduction in expenses has helped the company to improve its bottom line.
Default Loss Guarantee Increased
Separately, Paytm announced that it has increased its default loss guarantee to 3.5 billion rupees from 2.25 billion rupees to its lending partner SMFG India Credit for loans disbursed to merchants.
Share Price Reverses Course
Paytm shares, which had fallen over 11% so far in January, rose 0.3% after the results were announced, reversing course from an around 3% drop. This suggests that investors are optimistic about the company’s prospects.
EBITDA Improvement
Paytm’s earnings before interest, taxes, depreciation, and amortization (EBITDA) before cost of employee stock options stood at a negative 410 million rupees, compared to negative 1.86 billion rupees in the previous quarter. This improvement in EBITDA is a positive sign for the company’s future prospects.
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