Paytm (Buy)
Target: ₹1,250
CMP: ₹853.20
One97 Communications (Paytm) reported ₹1,830 crore in Q3FY25 revenue (+10 per cent q-o-q) driven by sustained rise in Payments GMV (+13 per cent q-o-q) along with a sharper growth in financial services driven by higher take-rates in merchant loan disbursals (16 per cent q-o-q).
Take-rate in financial services improved 188 bps sequentially majorly due to: about 80 per cent of merchant loan disbursals (₹3,100 crore) shifting to FLDG; higher mix of merchant loans; and collection efficiencies driving higher incentives on these merchant loans. Personal Loans dipped 12 per cent q-o-q with continued pressure being seen while merchant loans rose 16 per cent q-o-q driven by pent-up demand.
Marketing services revenue declined 12 per cent sequentially (flat excluding Events Ticketing business). With front-ended DLG cost being parked under other direct expenses, the company reported 130bps sequential dip in contribution margin.
However, continued tight control on indirect expenses ensured Adj. EBITDA loss of ₹40.5 crore, improvement of ₹150 crore q-o-q.
Going forward, we expect the impact of DLG cost to normalise with CM reverting back towards 55 per cent (excluding UPI incentives) and the company reporting PAT profitability next quarter, thanks to UPI incentives worth ₹350 crore.
