Paytm Q1 Results: Net Profit Logged First Time Since Listing, Revenue Stays Flat

Lower employee stock ownership cost, growth in distribution of financial services business and higher other income helped Paytm parent One 97 Communications Ltd. to turn profitable in the quarter ended June, as per the financial results declared by the company on Tuesday.

This is the first time when the payments services provider has logged a quarterly net profit, since its listing in November 2021.

The company posted a bottom-line of Rs 122.5 crore, as compared to Rs 540-crore net loss reported in the preceding quarter.

In April, Paytm's Chief Executive Officer Vijay Shekhar Sharma had said during Q4 earnings call that "we are at a verge of PAT (profit after tax) profitability. I am very sure that next quarter onwards, if everything goes as we are seeing, it could very well be a PAT quarter."

On the operational side, Paytm's earnings before interest, taxes, depreciation and amortisation came in positive. The firm logged an Ebitda of Rs 71.5 crore, as compared to loss of Rs 88.6 crore in the preceding quarter.

The positive Ebitda, along with net profit, demonstrated "AI-led operating leverage, disciplined cost structure and higher other income", the company said.

"We were expecting Ebitda losses to halve during the quarter but the results were a massive beat on our expectations," said Vinit Bolinjkar, head of research at Ventura Securities. He also said that the business has turned extremely profitable and expect a "strong growth trend" to map out.

Revenue from the company's distribution of financial services surged 100% on-year to Rs 561 crore. This was driven by increase in merchant loans, trail revenue from default loss guarantee portfolio and better collections.

Paytm's marketing expenses were down by 65% on-year at Rs 62 crore and its ESOP cost was down 88% on-year at Rs 30 crore.

ESOP cost was lower on account of new appraisal grants given late in the quarter. The company expects full impact of new appraisal grants in the second quarter.

Non-sale employee cost of the company was also down by 28% on-year.

Fall in ESOP cost has come as Sharma in April had voluntarily forgone all 2.1 crore ESOPs or ESOP units granted to him.

This resulted in a one-time, non-cash, acceleration of ESOP expense of Rs 492 crore in the March quarter, but the company had said it would lead to an equivalent lowering of ESOP expenses in future years.

This has come as Securities and Exchange Board of India had last year issued a show-cause notice to Paytm over the ESOP units granted to Sharma, the company's founder and CEO, prior to its IPO.

Sharma was issued the 2.1 crore ESOPs, with the intent of vesting them equally over the next five years, in financial year 2021-22. The payments firm went public during the same fiscal.

SEBI's scrutiny in the matter centred around Sharma's status as a public shareholder in Paytm. As per SEBI's norms, ESOPs are strictly prohibited to be issued to promoters.

During the quarter ended June, the company's gross merchant value rose by 27% on-year to Rs 5.39 lakh crore. In this quarter, payment processing margin was comfortably above the guided three basis points margin.

On a consolidated basis, margins were at 3.7%.

Overall, contribution profit at Rs 1,151 crore, up 52% on-year, also aided the company's earnings. The contribution margin came in at 60%, marking an increase of 10 percentage points YoY on account of higher share of distribution of financial services revenue, increase in net payment revenue and lower direct expenses.

"We expect the contribution margin to be in the mid to high 50s percent for the year," the press release said.

The company's revenue from operations was flat at Rs 1,918 crore versus Rs 1,912 crore in the fourth quarter of fiscal 2025.

As of June end, merchant subscriptions were at an all-time high of 1.3 crore, an increase of 21 lakh on-year on the back of high quality devices and superior service network.

Before the quarterly results were declared, One 97 Communication's stock settled 3.37% higher at Rs 1,052.6 apiece on the BSE, compared to a flat close of the benchmark Sensex.