Paytm CEO spent 90 minutes on a call with investors after his turbulent debut

After a turbulent debut for the company behind India’s largest IPO, senior Paytm executives spent 90 minutes on a call with investors and analysts on Saturday as they analyzed its business model and raised questions about monetization.

It remains to be seen whether officials have done enough to ease doubts about revenue streams and profitability prospects when markets reopen. One97 Communications, the parent company of the digital payments giant, finished 17% below its offer price of Rs 2,150 ($ 28.68) last week, after falling to just Rs 1,271 at one point.

Over the weekend, One97 reported that losses rose to 4.74 billion rupees in the July-September quarter from a year earlier amid rising expenses. Revenue increased more than 60 percent in the same period, driven by growth in financial, business and cloud services.

“Strong momentum in revenue growth will continue,” CFO Madhur Deora said on the call. Contribution margins skyrocketed “with clear trends toward continued year-on-year improvements,” he said in the presentation that was later presented to the stock exchanges.

Chief Executive Officer Vijay Shekhar Sharma highlighted the company’s rise in the key segment of lending, an important and fast-growing market in credit-crippled India, where digital fintechs like Paytm serve millions of consumers. and merchants.

“We are fully committed to head down and execute and deliver great results quarter over quarter, year over year at that,” Sharma said in his opening remarks.

Kranthi Bathini, equity strategist at WealthMills Securities Pvt. Ltd, said Paytm’s figures didn’t immediately look encouraging.

“It’s in the growth phase, so costs will remain high, but you will have to draw a line on how much cash they can spend,” Bathini said. “It is a big brand and it is important that they create synergies between the companies. You will have to ensure that productivity begins to be reflected in profits going forward.”

Paytm raised $ 2.5 billion in its IPO, but its debut debacle made it one of the worst opening shows by a major tech company since the dot-com bubble era in the late 1990s.

Sharma founded One97 two decades ago and began offering digital payments in 2014. It garnered major sponsors such as Masayoshi Son’s SoftBank Group Corp, Warren Buffett’s Berkshire Hathaway, and Jack Ma’s Ant Group as it became the most recognized payments brand in the country.

Paytm has more than 335 million users who use its platform to make payments and transfer money. Still, fintech companies have struggled to make digital transactions profitable in India’s vast electronic payments sector, particularly in the consumer market, where Paytm’s rivals include Alphabet Inc’s Google Pay, Amazon Pay from Amazon.com Inc and PhonePe from Walmart Inc.

“India has a great credit opportunity and the expansion can be huge from where we are today,” Bhavesh Gupta, head of the company’s lending division, said on Saturday’s conference call. “Paytm is in both consumer loans and business loans, we have a two-sided opportunity.”

Paytm said that its financial services segment posted higher revenue and profitability after volume growth, that its trading business, which includes trading stocks, airline tickets and movies, has recovered and the increased acceptance of services in the Cloud has driven ad revenue.

“Loans and advertising, in particular, are contributing significantly to high-margin monetization,” Sharma said, even as he acknowledged the competition in those businesses.

The company’s path to profitability could be through accelerating lending, commerce, and cloud services, as well as reducing marketing expenses, said Anand Dama, head of research for banks and financial institutions. for Emkay Global Financial Services. An expected moderation in the high-margin portfolio business could lead to sustained pressure on revenue growth, especially in the payments business, he said.