Here are 5 primary highlights from Paytm Earnings Call Q3FY24

In the December ending quarter of the current financial year, Paytm recorded revenue growth of 38% YoY to ?2,850 crore. Improving profitability, our EBITDA (excluding ESOP) witnessed a significant increase to ?219 Cr. Additionally, our PAT improved by an impressive ?170 Cr YoY to (?222 Cr).

In an earnings conference call with analysts on Saturday, our senior management gave an overview of the growth and achievements of Q3 FY2024.? The call was led by MD and CEO Paytm Vijay Shekhar Sharma, COO Paytm Bhavesh Gupta and Group CFO Paytm Madhur Deora .?

Here are the five key takeaways from the call:?

You can also hear the replay of the earnings call here?

1. Strong financial performance with improving EBITDA before ESOP, being positive for 5 quarters now?

With focus on profitability, we continue to improve our EBITDA before ESOP. Our CFO Madhur Deora highlighted a substantial surge in EBITDA before ESOP, increasing by ?188 Cr YoY to reach ?219 Cr. This impressive performance resulted in a notable 8% margin, marking a 6 percentage point YoY growth.?

“In terms of EBITDA, our EBITDA before ESOP has increased to INR 219 crores, as you can see from this chart. This has been a consistent improvement every quarter for the last 6 or 7 quarters that you can see since we turned breakeven and profitable. We expect because of the very strong momentum that we have across several businesses that we'll talk about as well as operating leverage that EBITDA will continue to improve and next quarter will be better than this quarter,” President and Group CFO Madhur Deora said.?

2. Leveraging the power of AI for? enhanced operating efficiency?

As India’s top tech innovator, we are at the driver’s seat for the Artificial Intelligence-led revolution in the country. Over the last year, we have been focussing on Artificial Intelligence to streamline business processes and drive operating leverage. Our Founder and CEO, Vijay Shekhar Sharma, gave an overview of how we are leveraging AI for growth in our business to create higher quality products, and drive efficiencies across business, operations and risk functions.?

“In the last two quarters, the tech world has seen a dramatic revolution due to the power of AI. We have seen our company using AI in different use cases. Our financial services will leverage the power of AI. Marketing and customer relations will also benefit from this.”?

“We are leveraging AI in two key growth areas - accelerated deployment and working with CoPilot tech companies. And second, enabling us to create operating efficiencies, use machines to scale the system more,” he added.?

3. Expanding our Financial Services Distribution Offerings?

In Q3 FY2024, we had spoken about our focus on expanding our financial services distribution offerings. This business remains strong with increased distribution of high ticket loans, along with two large opportunities; Insurance distribution and Equity broking.??

Following our update on December 6 about calibrating Paytm Postpaid loan disbursals, our senior management further mentioned that while Postpaid services remain active, there is a strategic shift towards high-ticket loans, with improved approval rates and collaboration with lending partners.

Expressing confidence, Bhavesh Gupta stated, “We are comfortable with our partners. It was better to be ultra conservative for postpaid. We continue to go in that direction. Our portfolio remains strong. Further, growth will come from high ticket loans. For personal loans, the bounce rate coming down is a very good sign.”?

Gupta also shared that Postpaid has very low contribution to revenue and minimum impact towards the bottom line and we have various products to fill the gap of postpaid reduction.?

He also added, “Postpaid contribution in a quarter for us used to be about INR 8,000 crore, INR 9,000 crore disbursements. That number has come down in December to about 60% and will continue to slide down. So there, the gross revenue will go away"

"In quarter 4, there will be reasonable compensation through high-ticket personal loans, which have higher revenue than the postpaid revenue. Their revenue is much higher than the postpaid revenue and their EBITDA contribution is significantly higher than postpaid. So maybe 2 quarters forward, the loss of revenue of postpaid will get compensated. And in the next quarter itself, the loss of postpaid EBITDA of postpaid will get compensated", Mr Gupta added.

Further expanding on the same, our management also talked about Paytm’s focus on insurance and equity broking. “Insurance is now bundled in our core offerings, and the results have been even better than anticipated. We are also offering Paytm stock broking as a way to provide better cross-selling opportunities,” said our CEO and founder Vijay Shekhar Sharma.?

Bhavesh Gupta, emphasized the significant growth in customer engagement in F&O and equity trading. “The depth of customers trading on F&O or equity trading has become significantly larger for us. Our strength is in our distribution franchise and product innovations over the other platforms. We believe this could become a meaningful part of financial services revenue in 12-18 months”, he said.?

4. Paytm Soundbox: The preferred choice for merchants in India

One of the interesting talking points during the call was what makes Paytm Soundbox a preferred choice among merchants. Answering the same, Mr Gupta emphasized, “Settlements come early and the product is superior. If somebody is offering the soundbox for free, it is not material for a merchant. We do settlements before 6am, before the day starts. Other settlements come around 8-9 am. Notification speed, settlements, bluetooth are the key differentiators”

He added, “We keep growing in terms of prices and features. There are 19 players in the industry giving similar products. We manufacture in India will always give us a significant differentiator in the market.”?

Paytm is a leader in merchant payments in India, with over 10 million devices deployed across the country. In fact, we deployed 14 lakh merchants in a single quarter subscribing to our devices. And as our CEO Vijay Shekhar Sharma said, “We want to be known as the “Payment Merchant Network.” .?

5. 100 Million Monthly Transacting Users on Paytm?

With over 100 million Paytm monthly transacting users on the app, Paytm is spearheading the digital transformation across India.?

Sharing insights on how we achieved the same, our founder said, “We have been able to do it very prudently and our focus is on acquiring strictly monetizable incremental users. There are products like UPI Credit, UPI AutoPay, which are actually going through the roof. We believe that will generate even a higher quality of customers on our platform, and we will continue to acquire customers with that insight.”