Paytm's Q3 revenue rises as loans, transactions grow amid festive season

Fintech giant Paytm pared its loss to Rs 222 crore in the October-December 2023 quarter on the back of a 38% rise in its revenue as it disbursed more loans and processed a greater number of transactions during the festive season.

Paytm had reported a net loss of Rs 392 crore in Q3 of the previous financial year.

Its revenue rose to Rs 2,850 crore in Q3 FY24 from Rs 2,062 crore a year ago, mainly due to strong performance in its payments and financial services business unit.

Paytm's main business units—payments and financial services, as well as commerce and cloud services—experienced solid growth.

Expenses, however, continued to remain a roadblock in its path to profitability.

The company reported a 31% rise in its direct expenses to Rs 1,331 crore, while indirect expenses, which include marketing, employee, software, cloud and data center-related costs, rose by 28%.

Paytm said its focus on integrating artificial intelligence into its workflow should result in a decline in its employee costs, going forward.

Bigger loans, insurance, and brokering

Paytm, which was listed on the stock market in 2021, has been focusing on expanding its loan book in a bid to shore up revenues as well as become more resilient in the face of UPI transactions that have eaten away at its transactions business.

In a recent stock exchange filing, the Noida-headquartered company said it would cut down on disbursing small loans under Rs 50,000 and instead focus on higher-ticket loans to low-risk, high-credit-worthy customers.

Paytm disbursed 1.15 crore loans in the quarter—up 10% from a year ago. However, this was a quarter-on-quarter (QoQ) decline of 15%. The value of its loans was Rs 15,535 crore in Q3 FY24, versus Rs 9,958 crore in the comparable period a year ago.

The Noida-headquartered company said it expects its loan business to continue to grow in the coming quarters, especially as it adds more lending partners.

“We are currently working with two lending partners for high-ticket loans and we expect to add at least 3-4 more lending partners by Q1 FY 2025,” the company said.

Paytm currently works with eight non-banking financial companies to facilitate loan disbursals, and three banks for its credit card product.

Apart from its loan distribution business, Paytm also wants to grow its insurance and brokerage business.

“Our equity broking and mutual fund distribution business continue to scale well with organic traffic from Paytm app helping it grow with minimal marketing spends. Our focus is on retention of trading customers by offering a high-quality trading platform and significantly build mutual fund distribution by leveraging SIPs,” Paytm said.

Its total transactions increased by 55% to 1,185 crore, leading to a 43% increase in revenue from payments and financial service business unit. The festive season was partly responsible for the increase in total transactions, Paytm said.

"In this quarter, our merchant subscriber network crossed the 1 crore benchmark and grew by 14 Lakh for the quarter. Strong device growth is also fueling growth in GMV, which helps us drive payment processing revenue," the company added in its press release.

Paytm's shares on Friday closed at Rs 766.20—2.5% higher from yesterday's close. Over the last year, its stock has risen 45.4% as of Friday's adjusted close of Rs 773.60.

(The copy was updated with more information.)