Paytm's losses widen, operating revenues up 64 percent

One97 Communications-owned Paytmon Saturday said its loss in the second quarter widened to Rs 474 crore from the year-ago period, owing primarily to higher payment processing charges, which led to an overall increase in direct expenses.

Loss for the period in the year-ago quarter was Rs 437 crore, Paytm said.

Expenses rose 32 percent to Rs 826 crore in the second-quarter on higher payment processing charges, Paytm's largest expense component. Its indirect expenses, which includes employee costs, marketing, and software, cloud and data center also jumped 65 percent.

Paytm's top line showed strength, mainly due to an increase in total transactions, higher gross merchandise value, and merchant transactions.

Revenue in the second quarter ended September 30 rose 64 percent to Rs 1,086 crore, with payment and financial services and commerce and cloud services both showing growth.

The fintech firm said its revenue growth was driven by a 52 percent growth in non-UPI payment volumes, which includes payments done via debit cards, netbanking, and credit cards, among others.

Paytm's biggest business - payment and financial services - accounted for nearly 77.6 percent of the overall revenue in the quarter. Its payment services to consumers and merchants both showed solid growth.

The payments and financial services unit offers services such as payments facilitation, wealth management, and merchant transactions, as well as products such as credit cards, loans, and insurance, among others.

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The Vijay Shekhar Sharma-led financial services firm debuted on the stock exchanges on November 18, listing at a discount to its issue price. Its shares have declined 18 percent as of Friday's close at Rs 1,765.60, from their final issue price of Rs 2,150.

Stock market analysts have been divided in their opinion about Paytm and its listing. While brokerage Macquarie initiated its research coverage on Paytm with an 'underperform' rating and setting a target price of Rs 1,200 saying it's a "cash guzzler", others have said that being a leader in the fintech space, Paytm has a substantial user base of consumers and merchants that will continue to consume its services and products.

Paytm's innovative solutions and ability to adapt to market changes, led by its strong leadership, has also kept investors hooked to its growth story over the years.

The fintech major, earlier this month, said its gross merchandise value (GMV) - the total value of merchandise sold over a fixed time period - rose 107 percent in the quarter ending September 30, 2021, to Rs 1,95,600 crore.

It added that for the month of October 2021, the company recorded a GMV of Rs 83,200 crore, up 131 percent from Rs 36,000 crore last year. This was driven primarily by festive season spends, an increase in the number of merchants and consumers and increased adoption for digital payments both in-store and on devices deployed by Paytm.

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Startup ecosystem cheers Paytm

Paytm's IPO has been a historical moment for the startup ecosystem, one that signals the coming of age of innovative tech companies from India.

From a small wallet startup in 2009, Paytm today has spread its reach far and wide in the financial services sector, right from digitising small businesses to helping people invest in capital market instruments.

Kumar Abhishek, Co-founder and CEO of proximity-based contactless payments company Tonetag, which counts Amazon and Mastercard among its investors, said, while there might have been hiccups with Paytm's IPO, the fintech journey has just begun.

"Only 50 million Indians are actually transacting online now. The opportunity ahead is multiples of that," he added.

Rehan Yar Khan, Managing Partner at the early-stage fund, Orios Venture Partners, on the other hand, said: "Paytm's IPO has been a wonderful sobering moment for the Indian tech IPO story," adding it will lead to investors, the markets, and founders re-evaluating the lofty valuations they ascribe to their stocks, pre-IPO.

"The mood this week, with founders and bankers, is to tone down aggressive listing prices and offer at values that allow for the stock to rise post listing," Rehan said.