Paytm states that operational profitability is "sustainable"
By Team Startupcity | Tuesday, 07 February 2023, 10:02 IST
One 97 Communications Ltd, the parent company of Paytm, stated on Monday that the operating level profitability was "sustainable" after reporting positive earnings before interest, taxes, depreciation, amortisation, and employee stock option costs of Rs 31 crore for the quarter ended December 31 last week. Operating revenue for the company increased 42% year over year to Rs 2,062 crore, while third-quarter net losses shrank to Rs 392.1 crore.
"We improved our contribution margins from 31% one year ago to 51% now. During a post-earnings call with investors on Monday, Paytm's group chief financial officer Madhur Deora stated that indirect costs as a percentage of revenue had decreased from 58% to 49%. According to him, Ebitda profitability was attained three quarters earlier than expected. Shares of One 97 Communications closed at 558, up 6.3% on the BSE. On Friday, the results were made public after market close.
"As you would have noted, this amount (indirect expenses) has been flat over the last three quarters at roughly Rs 1,000 crore per quarter, and this has increased only 20% year over year. As a result, this has decreased significantly as a percentage of revenue, and the combination of these two factors has allowed us to achieve Ebitda profitability, he added. I should emphasise that this (Ebitda profitability) is sustainable and was achieved without reducing investments that we think add value to the company.
According to Deora, the corporation would try to boost indirect costs as monetisation progresses, "but not at the price of free-cash flow or profitability." Due to consistent growth in contribution profit and excellent operating leverage, Paytm's reported operating profit increased by Rs 424 crore from the prior-year period, and margins improved to 2% of revenue from -27%.
Deora added that the expansion of cards, EMI-led payments, and the Unified Payments Interface (UPI) had not yet reached the general public. He also discussed Paytm's intentions to introduce UPI Lite, a UPI payment method based on a virtual wallet that supports transactions up to Rs 200 and can be completed without the need for a UPI PIN. the first to announce that Paytm would shortly launch UPI Lite on its app.
"While digital payments in India have expanded significantly, they are still in their infancy. We're going to introduce UPI Lite soon, which permits several low-value UPI payments, and we think that this will encourage people to start using digital payments, said Deora.
Paytm also disclosed on Friday that it had received Rs 68 crore in UPI-related government incentives for the first three quarters of the previous fiscal year and that the company anticipates receiving roughly Rs 130 crore for the same period of time in the following fiscal year, which ends on March 31, 2023.
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