Paytm says operating level profitability ‘sustainable’

The company’s operating revenue grew 42% year on year to Rs 2,062 crore, while net losses narrowed to Rs 392.1 crore in the third quarter.

“Our contribution margins a year ago used to be 31%, and we have improved it to 51%. Our indirect expenses as a percentage of revenue have gone down from 58% to 49%,” Paytm’s group chief financial officer Madhur Deora said during a post-earnings call with analysts on Monday.

He said the Ebitda profitability had been achieved three quarters ahead of guidance. One 97 Communications’ shares ended 6.3% higher on the BSE at Rs 558 on Monday.

The results were announced after market hours on Friday.

“As you would’ve noticed, in the last three quarters this number (indirect expenses) has been flat at about Rs 1,000 crore a quarter, and on a year-on-year basis this has been up only 20%. As a result, as a percent of revenue, this has declined quite meaningfully, and a combination of these two has allowed us to become Ebitda profitable,” he said. “I should call out that this (Ebitda profitability) is sustainable and has been done without cutting down on investments that we believe generate value for us.”

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On indirect costs, Deora said that as monetisation kicks in, the company will look to increase indirect expenses, “but not at the expense of free-cash flow or profitability”. Paytm’s reported operating profit improved by Rs 424 crore from the year-ago period, and margins improved to 2% of revenue from -27% a year ago, due to sustained improvement in contribution profit and strong operating leverage.

Deora also said that the growth in Unified Payments Interface (UPI), cards and EMI-led payments have yet to reach the masses.

He also spoke about Paytm’s plans to launch UPI Lite, a virtual wallet-based UPI payment method for transactions up to Rs 200 that can be made without the use of a UPI PIN.

ET was the first to report on Monday that Paytm planned to roll out UPI Lite soon on its app.

“While India digital payments has grown quite a lot, it is still in very early days. We’re going to be launching UPI Lite soon, which allows multiple small-value UPI payments, which we believe will lead to adoption of digital payments,” Deora said.

Paytm also said on Friday that it had received Rs 68 crore in UPI-related incentives from the government for the first three quarters of the last fiscal year, and that the company estimates it will receive around Rs 130 crore for the first three quarters of the year-ending March 31, 2023.