Paytm CFO Predicts Rapid Profitability Recovery Despite Early FY25 Challenges

Paytm has excess cash and will get back on the path of profitability very quickly, despite some impact in the first quarter of the ongoing financial year, said Group Chief Financial Officer Madhur Deora in a post-earnings analyst call.

"...We do have excess cash; there's no doubt about that... While we have mentioned that the next quarter will be Ebitda negative, we will get back very quickly on the path of profitability," he said.

"...And it is logical for us that unless we're going to spend that cash, we should be having discussions with our board about how best to return that cash to shareholders."

However, Deora said it is better to wait until July to be more specific about exactly how the business will break even.

This update comes after the company said its fourth-quarter numbers were impacted due to the Reserve Bank of India's crackdown on Paytm Payments Bank Ltd. However, the full impact would be seen in April-June quarter.

It expects the current quarter revenue between Rs 1,500 and Rs 1,600 crore. But due to disruptions in operating metrics, it expects to have an incremental impact on the operating income or the earnings before interest, tax, depreciation and amortisation of Rs 100–150 crore, according to an exchange filing.

Due to this crackdown, Paytm started transitioning towards other businesses, with more focus on payments and cross-selling of financial services.

Addressing the impact, Deora said that 12% of gross merchandise value was coming from businesses that have now been discontinued.

As far as loans are concerned, the company has now shifted to a distribution-like model, from which it earns distribution fees.

"We have paused small personal loans and postpaid loans...have started distributing more types of business loans with more lending partners," he said.

The company expects rates to settle at 3–3.5% due to an increase in the distribution of loans and a focus on prime and super-prime customers, Deora said.

Discussing compliance, Vijay Shekhar Sharma, founder and chief executive officer of Paytm, said the company expects to appoint more subject matter experts as advisors or independent directors.

Paytm would expand offerings through insurance and equity broking, he said in an address after the earnings. "We are also looking at micro LAP and trying to secure credit as part of our experiments," he said.

Paytm also plans to optimise its cost structure, as in recent years employee costs have increased, according to an exchange filing.

For the coming year, Paytm expects to invest in the merchant sales team, risk and compliance functions, but sees some reductions in other employee costs. This would lead to annualised cost savings of Rs 400–500 crore, the company said in its fourth quarter earnings statement.

On this, Sharma told analysts that the company would continue to add more sales executives.