PayTM (One 97 Communications Ltd)

Here is my take on the results:

Payment Services Revenue

1. Revenue Growth
   This segment has been flat. About 1% growth QoQ and 21% YoY (34% adjusting for UPI incentive)
2. Expenses
   Reduction of 1% QoQ and 6% YoY driven by festive season sales (though the report incorrectly says Q2 FY2023)
3. My take
   Disappointed with this segment. Flattish revenue (QoQ or even compared to last few quarters). Expenses have gone down, marginally, which is a positive, but I am not sure if this is an aberration or the new normal. Further, the guidance is that the payment processing margin will reduce from 7-9 bps to 5-7 bps

Financial Services & Others

1. Revenue Growth
   Steep revenue increase. 250% YoY and 27% QoQ
2. Expenses
   Check overall expenses
3. My take
   Impressive performance in this segment. The company gets 2.5-3.5% of loan value at disbursement and 0.5-1.5% post-portfolio closure (which should come in in about a year or so).

Commerce and Cloud

1. Revenue Growth
   Flattish revenue. 24% YoY
2. Expenses
   Check overall expenses
3. My take
   Indifferent

Overall Expenses

• Indirect expenses have decreased from 58% of revenue (Dec-21) to 51% of revenue (Dec-22). Very impressive.
• ESOPs have gone up by 150%. This is very disappointing, especially when the company’s stock price is struggling. I understand that not 100% of ESOPs will vest, but the company should provide visibility on ESOP cost in the future, and the method of allocation.

Final Note
1. I think Paytm is becoming more of a lending company as opposed to a Payment Company
2. Strong performance in lending. Not so much in payments and commerce/cloud business
3. Operational profitability is good. But the management has to provide visibility on ESOP allocation, and not abuse this instrument.

Source

Disc:
For educational purposes.
Ex-Paytm employee (left org in 2019).
Invested