Paytm - Get Set PAY: Motilal Oswal Initiates Coverage

Motilal Oswal Report

One 97 Communications Ltd. is India’s leading payments app and fintech enterprise offering payments, financial services, commerce, and cloud services to its large consumer/merchant base of ~350 million/ ~31.4 million, respectively as on Q3 FY23.

It is among the largest payments platform, with gross merchandise of ~Rs 13.2 trillion in FY23 (Rs 8.5 trillion in FY22).

Paytm has grown its monthly transacting users to 90 million as of FY23 that provides a ready customer base to cross-sell financial products to consumers; while, robust growth in subscription devices has helped improve throughput and supported growth in merchant loans.

During FY23, Paytm reported a 4.6 times jump in the of loans disbursed to reach an annualised run-rate of Rs 500 billion. We estimate disbursements to report a steady 64% compound annual growth rate over FY23-25, thus driving the mix of financial revenue upwards to 31%.

Paytm has achieved a breakeven in adjusted Ebitda during Q3 FY23, well ahead of its guidance. We estimate contribution margin to improve to 56.8% by FY25 from 30% in FY22, fueled by improvement in operating leverage and rise in financial business mix.

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