Meanwhile, its consolidated revenue from operations increased by about 76% to ₹1,914 crore during the reported quarter, buoyed by acceleration in lending business, rebound in payment services to merchants, and uptick in cloud revenue, from ₹1,086 crore in the corresponding quarter of the previous fiscal.
“One 97 Communications (Paytm) continues to improve its revenue and margin profile, evident in narrowing of consolidated loss in Q2FY23 (vs loss in Q1FY23). The performance was characterised by sustained lower processing charges and net payment margin improving a tad; sharp acceleration in lending business; enhanced contribution/adjusted-EBITDA margin with higher financial services/cloud revenue growth further aided by lower indirect costs; sustained growth in monthly transacting users (MTUs), deployment of offline devices and continued build-up of gross merchandise value (GMV)," highlighted ICICI Securities.
The company's net payment margin (calculated as payments revenues plus other operating revenues, less payment processing cost) increased multi-fold to ₹443 crore on year-on-year basis on account of improved monetisation and continued focus on reduction in payment processing charges.
“Steady improvement in margin profile with better monetisation suggests achievement of operating profitability (positive EBITDA before ESOP cost) ahead of its guided timeline of Q2FY24," the note stated. The brokerage has maintained its Buy rating on Paytm shares with an unchanged target price of ₹1,285 apiece.
The company is expanding its product offering and signing up more users in a bid to convince investors of its earnings potential. Paytm shares have slumped about 70% since its high-profile initial public offering (IPO) a year ago over concerns of mounting losses. Though, Paytm reiterated that it expects to reach operating profitability by the quarter ending September 2023 amid continued revenue growth.
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