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Dolat Capital Report
One 97 Communications Ltd.'s analyst meet, aimed at giving further clarity on the biz model, total addressable market, growth drivers, color on cost structures and employee stock ownership plan charges.
In payments business, management is positive that this business will can generate positive free cash flow on standalone basis with current spread of about 7-9 basis points, (including unified payments interface 3-4 bps and non-UPI at 15-18 bps).
In distribution business expect even better yields in loans (currently 3- 5%) and large growth in devices (TAM of 100 million plus merchant), credit cards (0.3 million activated). Commerce take rates at 6%.
On the cost front, Paytm expects payment processing charges to trend downwards with rise in UPI, and expects overall profitability improvement despite investments in sales (Rs 1.7 billion in Q2) and marketing (Rs 1.4 billion in Q2).
By providing additional, deeper disclosures, detailing business growth plans, along with growth and FCF focus, retains our confidence in Paytm as a true tech platform leverage.
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