Paytm: Loan distribution business needs to hold the fort

livemint.com:

₹100 crore in Q4FY24 but the numbers have to be adjusted for the accounting of unified payments interface (UPI) incentives from the government for user payments made directly from a bank account. Though part of operating income, the need for the adjustment arises because the payment for the whole year is reflected in Q4. Adjusting for this, Paytm saw a loss of ₹186 crore in Q4 at the Ebitda before ESOP level.

This loss, according to the management, is expected to widen ₹500-600 crore in Q1FY25. Revenue guidance for Q1FY25 is at ₹1,500-1,600 crore, down from nearly ₹2,000 crore in Q4FY24, excluding UPI incentives. A significant chunk of the incremental loss in the current quarter may be attributed to the fall in payment service income, with data from the National Payments Council of India showing an almost 8% sequential drop in UPI transaction value on the Paytm app in April.

While the overall payment processing margin for the year is expected to be 5-6 basis points (bps) of gross merchandise value (GMV) including UPI incentives, quarterly payment processing margins, without UPI incentives, are expected to be more than 3 bps. To be sure, Paytm’s payment services business is not the main focus for investors given the already wafer-thin margins and new competitors testing the waters such as Jio Payments Bank and PB Fintech. It was the cross- selling opportunity to develop the lucrative business of loan distribution or financial services that had caught everyone’s attention.