Paytm ahead of schedule on break-even plans: CFO Madhur Deora

Paytm chief financial officer said in an analyst call that the fintech company is ahead of its schedule in its plans to achieve break-even. The company's contribution margin improved by 20 percentage points in the September quarter.

However, Deora maintained that the earlier guidance for achieving adjusted EBITDA break-even by September 2023 would remain unchanged. Adjusted EBITDA, a metric used by several listed tech companies as a proxy for operating profitability, is EBITDA before employee stock option expenses.

In the September quarter, Paytm posted a contribution margin of 44 percent and an adjusted EBITDA loss of Rs 166 crore. On a consolidated basis, the company’s net loss widened to Rs 571.5 crore even as operating revenue jumped 76 percent to Rs 1,914 crore.

With its revenue from the lending business growing fast, the company expects further improvement in overall margins as the segment has better unit economics than payments.

While its payments services revenue increased 56 percent year-on-year to Rs 1,173 crore and the cloud & commerce segment grew 55 percent to Rs 377 crore, the financial services line (of which lending is a large portion) expanded much faster at 293 percent to hit Rs 349 crore in Q2.

“The margin in lending is better than payments and so we expect to benefit from a better revenue mix in the future,” Deora told analysts.

Paytm disbursed 9.2 million loans worth Rs 7,313 crore during the quarter – with the number of disbursals growing 224 percent year-on-year and value of loans rising 482 percent.

“The growth of high margin revenue will give an uplift to the contribution margin. Also, even small improvements in the net payment margin by 10-15 percent will have an impact on the bottom line as payments revenue is a large number,” Deora added.

The Paytm CEO maintained that while the company will look for any opportunities to improve its profitability, it won’t shy away from making investments that can help it grow faster.

After a blockbuster initial public offering in November 2021, the fintech major has seen its fortunes slide in the public market amid a global drawdown in tech stocks. The company’s shares are trading at Rs 653 apiece on the BSE, down 70 percent from its IPO price of Rs 2,150.