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Paytm Q3 Results: Net loss increases to Rs 778.5 crores but growth in revenue at Rs 1,456 crores

Paytm is one of the biggest startups to go public last year but its tepid listing raised concerns among investors.

Paytm reported that its loss widened to Rs. 778.5 crores in the third quarter ending December 2021, according to the disclosure filed with the Bombay Stock Exchange. The company had recorded a loss of Rs. 535.5 crores in the same quarter last financial year, increasing by nearly 45 percent year-on-year (Y-o-Y).

The payments company has reported an increase in revenue to Rs. 1,456 crores from Rs. 772 crores, registering a growth of 89 per cent Y-o-Y, as per the financial results. It reasoned that the growth was driven by “high festive season demand, particularly in online and offline merchant business”.

Source: PayTM Earnings Report

Paytm said that it has 64.4 million Monthly Transacting Users (MTU) which translates into a growth of 37 percent Y-o-Y in this quarter whereas it generated a revenue of Rs. 406 crores from these consumers.

Paytm is one of the biggest startups to go public last year but its tepid listing raised concerns among investors about the profitability of India’s startup ecosystem. The company’s financials are a good measure of the health of its business and whether it can set itself on the path to profitability.

Performance of Paytm’s merchant business

The company earned revenue of Rs. 586 crores, a growth of 117 percent Y-o-Y, for processing payment in merchant stores or the app and the website.

Some of its services to merchants include QR payments, EDC (Electronic Data Capture) and Soundbox devices, and Payment Gateway.

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“We were able to accelerate deployments in our devices business with an increase of 1.4 mn devices over the last year to 2.0 mn devices by the end of Q3 FY 2022,” read the earnings report.

The company explained that the spike was on account of MDR-bearing payment GMV growth, incentives received from partner banks for Payment Gateway services, and growth in the number of EDC and Soundbox devices”.

The report stated that Paytm had a network of 24.9 million merchants at the end of December 2021 increasing from 23 million at the end of second quarter.

Progress of Paytm’s financial services

The company is betting big on its offerings under financial services which includes lending, trading, and insurance. The revenue grew by 201 per cent Y-o-Y to Rs. 125 crores in Q3 FY 2022. The growth in revenue was primarily driven by growth (366 per cent) in the value of loans disbursed (Rs. 2,181 crore) to merchants and consumers.

The company said that its stock trading app, Paytm Money, recorded the highest number of traded orders in December 2021 whereas its insurance business commenced offering all types of insurance plans.

How has its lending arm fared in Q3?

The company doled out 4.4 million loans (401 per cent Y-o-Y) through the platform. The platform is focusing on small value loans terming them as their “strength and differentiator”.

“We are continually co-creating risk models with our lending partners, which helps achieve scale and risk-based pricing,” the company said.

  • Paytm Postpaid (Buy-Now-Pay-Later): It offers credit to users for purchases at over 35 lakh offline and online stores clocking over ₹1,190 crore. They grew by over 408 per cent Y-o-Y with the company having disbursed only Rs. 234 crore in December 2020.
  • Instant Personal Loans: The average ticket size of these loans range from Rs. 80,000 to Rs. 90,000 with average tenure of 12 to 14 months at Rs. 516 crores.
  • Merchant Cash Advance Loans: The average ticket size of these loans range from Rs. 120,000 to Rs. 140,000 and average tenure of 12 to 14 months at Rs. 474 crores.

What are the expenses highlighted in the report?

The company said that it reduced its indirect expenses from 72 per cent of revenues in Q3 FY 2021 to 58 per cent of revenues in Q3 FY 2022. The company’s expenses were also stressed by the cost (Rs. 389.5 crore) of employee stock ownership plans (ESOP).

  • Marketing expenses: These expenses comprise Rs. 166 Cr in Q3 FY 2022, which constituted 11 per cent of revenues, down from 13 per cent of revenue in Q3 FY 2021. “On an absolute basis, these costs are 64 per cent higher Y-o-Y and 63 per cent higher Q-o-Q, in part due to the seasonality in our spends on cricket sponsorships which are related to the schedule of cricket matches,” the report said.
  • Investments in Talent Acquisition: The cost of Rs. 442 crore is 49 percent higher Y-o-Y as the company said that it looks to augment its sales teams for merchant acquisition and technology. “This cost has been reduced to 30% of revenues from 38% of revenues during the prior year period. We expect the growth of Employee cost to moderate in the future,” the company remarked.
  • Building cloud Infrastructure: The company’s investment in tis software, cloud and data center was Rs. 130 crore in Q3 FY 2022 which was 37 per cent higher Y-o-Y as PayTM continues to invest in cloud infrastructure to support its transaction volumes.

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Written By

I cover several beats such as crypto, telecom, and OTT at MediaNama. I will be loitering at my local theatre and consuming movies by the dozen when I am off work.

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

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