One97 Communications (OCL) which owns the brand Paytm on Friday announces Q3 FY 2023 results. The company has achieved its operating profitability milestone with EBITDA before ESOP cost at Rs 31 crore, significantly ahead of its guided timeline of September 2023. 

EBITDA before ESOP margin stood at 2 per cent of revenues as compared to (27%) a year ago. The company continued to witness strong revenue momentum across its businesses. Paytm’s revenue from operations increased to Rs 2,062 crore (no UPI incentive recorded this quarter), a growth of 42 per cent YoY and 8 per cent QoQ, driven by increased adoption by consumers and subscription services by merchant partners along with sustained growth seen in loan distribution and commerce business. Revenue from financial services, which is majorly loan distribution, now accounts for 22 per cent of total revenues, up from 9 per cent in Q3 FY2022. 

The company’s founder and CEO Vijay Shekhar Sharma wrote a letter to shareholders announcing the achievement.

“This has been made possible due to the relentlessly focused execution by our team. The team was asked to focus on growth with quality revenues that contribute to the bottom line. We have achieved this milestone without losing sight of growth opportunities and keeping all compliances as well as risk factors under a strict watch,” said Vijay Shekhar Sharma. 

Sharma added that the next key milestone for Paytm is free cash flow generation. “With our focus on growth and keeping a tight vigil on operational risk and compliances, I am very confident that we will soon achieve our next milestone of becoming a free cash flow generating company,” he added. 

Contribution profit was Rs 1,048 Cr in the quarter, with margins consistently improving from 31 per cent in Dec-21 to 51 per cent in December 2022 on account of improved profitability of the payments business and increased mix of high-margin businesses such as loan distribution. 

Net payment margin grew to Rs 459 crore (up 120% YoY) on the back of improved profitability in the payments business.

The company’s loan distribution business saw further scale with 10.5 million loans amounting to Rs 9,958 Cr disbursed in the quarter (in partnership with its lending partners). The total number of unique borrowers who have taken a loan through the Paytm platform has increased by 1.4 mn in the quarter to 8.1 mn as of December 2022. The company believes that the scale-up in the number of users who have taken a loan through the Paytm platform provides it tremendous upsell and lifecycle benefits.

The company’s operating leverage is demonstrated by the reduction in indirect expenses (as a % of revenues), down to 49 per cent in Dec-22 from 58 per cent in Dec-21. The company’s net income stands at (₹392) crore, an improvement of 50 per cent from (₹779) crore a year ago.

The company said that it will maintain discipline on costs, as it continues to invest in areas where it sees potential for future growth, such as marketing (for user acquisition) or sales team (to increase merchant base and subscription services). The company will continue to focus on building a sustainable and long-term cash-generating business.