Paytm Gains NPCI Approval for New UPI Users, Posts ₹930 Crore Profit in Q2

Paytm has received approval from the National Payments Corporation of India (NPCI) to resume onboarding new users onto its UPI platform, following a halt due to directives from the Reserve Bank of India (RBI). This decision allows Paytm to expand its user base once again.

The approval is contingent upon Paytm adhering to specific guidelines and requirements set forth by NPCI, which encompass circulars related to risk management, brand standards, multi-bank protocols, TPAP market share, and customer data protection.

Paytm's Q2 Results

Paytm's parent company, One97 Communications Ltd, reported a consolidated net profit of ₹930 crore in the quarter ended September 30, 2024. This marks a significant turnaround from a net loss of ₹292 crore recorded in the same quarter last year. Sequentially, revenue from operations increased by 11% to ₹1,660 crore, compared to ₹1,501 crore in the June 2024 quarter. The profit was bolstered by a one-time exceptional gain of ₹1,345 crore from the sale of its entertainment ticketing business.

Despite reporting a negative EBITDA of ₹404 crore for the quarter, this represents an improvement of ₹388 crore from the previous quarter. The company aims to achieve positive EBITDA before ESOP profitability by Q4 FY25, with management emphasizing a commitment to profitability in core payments business.

The management highlighted that the impressive Q2 results were driven by strategic enhancements in their payments and financial services segments. The revenue from the payments business reached ₹981 crore, representing a 9% increase quarter-on-quarter, while the financial services segment saw a remarkable growth of 34%, contributing ₹376 crore to the overall revenue. This growth reflects the successful implementation of new initiatives aimed at scaling their operations and expanding service offerings.

Introduction of DLG Model

As part of its growth strategy, Paytm has announced that it will start Default Loss Guarantees (DLGs) for merchant loans, which will aid in increasing disbursements with existing and new lenders. The company received board approval for a DLG of ₹225 crore over a period of time. This model is expected to enhance loan distribution and drive financial growth, aligning with the company’s goals of compliance and innovation in merchant payments.

The company said in a statement, “Following the regulatory framework, and the emerging market practice, we see increased willingness from lenders to partner and allocate more capital in the Default Loss Guarantee (DLG) model. DLG model will help to increase disbursements with the existing partners and expand partnership with new lenders for the loan distribution.”

To Summarize

In conclusion, the management's optimism is underscored by their commitment to a compliance-first approach, continuous innovation in merchant payments, an ongoing focus on driving customer acquisition, and increasing high-margin revenue from financial services by broadening partnerships with financial service providers. They are determined to leverage Artificial Intelligence to reduce costs and enhance operational efficiencies, reinforcing Paytm’s commitment to achieving profitability and sustainable growth in the evolving digital financial landscape.