Paytm Aims for Profitability by June with Focus on Merchant Services in International Markets

Paytm, owned by One97 Communications, is prioritising financial services for merchants in its global expansion strategy. The company has established subsidiaries in the UAE, Saudi Arabia, and Singapore to support this initiative. "Our primary plan will be that," stated Vijay Shekhar, Paytm's founder and CEO, during an earnings call. He emphasised the importance of addressing SME credit needs globally.

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Financial Performance and Cost Management

In the December quarter of FY25, Paytm reported a reduced consolidated loss of Rs 208.5 crore, down from Rs 221.7 crore a year earlier. This improvement was largely due to decreased expenses, particularly in payment processing and employee costs. Revenue from operations fell by 35.8% to Rs 1,827.8 crore compared to the previous year's December quarter.

Despite this decline, there was a 10% increase in revenue on a quarter-on-quarter basis, indicating signs of recovery. The company's operational loss before employee stock options (EBITDA) narrowed significantly to Rs 41 crore from Rs 186 crore in the previous quarter. This was mainly due to reduced non-sales employee costs.

Profitability Outlook and Strategic Goals

Madhur Deora, Paytm's CFO, expressed optimism about achieving profitability soon. "I think in two or three quarters that gap will be basically zero," he said regarding the difference between EBITDA before ESOP and PAT. While reaching EBITDA breakeven and PAT profitability are milestones, Deora highlighted that the ultimate goal is a double-digit EBITDA margin leading to substantial PAT.

The company has achieved an 11% reduction in non-sales employee costs quarter-on-quarter and 36% year-on-year by leveraging AI for productivity improvements. Payment processing charges also decreased by about 42% year-on-year to Rs 570 crore.

Operational Developments and Strategic Moves

Paytm's monthly transacting user base increased to 7.2 crore in December after hitting a low of 6.8 crore in September 2024 due to restrictions on Paytm Payments Bank. The company's cash balance rose to Rs 12,850 crore following a stake sale in Japanese payments firm PayPay to Softbank Group for Rs 2,372 crore.

The contributing profit improved by 7% quarter-on-quarter to Rs 959 crore. Paytm calculates this figure by excluding certain expenses like payment processing charges and promotional cashback from operational revenue.

In a strategic move, Paytm appointed Bimal Julka, former information and broadcasting secretary, as a non-executive independent director. This appointment aligns with the company's efforts to strengthen its governance framework as it continues its international expansion efforts.

Overall, Paytm is focused on enhancing efficiency and leveraging technology to drive growth while maintaining a strong emphasis on financial services for merchants globally.