PayU India's PA license helps it post $237M revenue in H1 FY25, even as margins shrink

Prosus-owned PayU India notched a 12% year-on-year (YoY) revenue growth in H1 FY25, driven by increased payment volumes and merchant onboarding.

The payments and fintech business, which operates as a payment service provider (PSP) working with over 5 lakh businesses, earned $237 million in revenue in H1, benefitting from an in-principle approval from the RBI earlier this year to operate as a payment aggregator.

This growth was supported by a 25% YoY increase in total payment volume (27% in local currency), driven by financial services, government, and ecommerce sectors.

"PayU India is at an inflection point," remarked Fabricio Bloisi, CEO of Prosus. "The lifting of the merchant onboarding embargo in April 2024 has unlocked significant opportunities. We onboarded over 4,000 merchants in H1 alone, and we are building further momentum for stronger results in the coming quarters."

In 2022, the Reserve Bank of India imposed a merchant onboarding embargo on payment aggregators like PayU and Razorpay primarily due to compliance and regulatory audit requirements. In December last year, it lifted the ban on PayU and other fintech firms, allowing them to resume onboarding merchants.

"Performance since the embargo on onboarding new merchants was only lifted in April 2024, and some lead time is needed to activate new merchants and improve financial performance," Bloisi added.

Despite revenue growth, PayU's margins have faced pressure. The aEBIT (adjusted earnings before interest and taxes) margin for PayU India's PSP operations was -5%, a slight decline of 2 percentage points from the previous year.

"The PayU India business is adapting quickly to an increasingly competitive landscape in which shifts in payment mix are placing pressure on take rates," the CEO noted.

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PayU’s credit business saw its revenue grow by 91% YoY to $82 million. Loan disbursements increased by 63% YoY to $592 million, and the total loan book reached $552 million, driven by growth in both consumer and small business lending.

"We are exercising caution in an evolving regulatory environment," noted a company spokesperson. "Our focus is on building a high-quality loan book with optimal risk-return parameters."

While the credit business continues to incur losses, these have narrowed with the aEBIT margin improving from -35% to -23%.

"India's payment market is incredibly dynamic, and competition is fierce," Bloisi highlighted. "We see these challenges as opportunities to innovate and differentiate PayU. With our continued investments in technology and partnerships, we're well-positioned to capitalise on long-term growth in the fintech space."