New Delhi: Following the turbulent debut after the initial public offering (IPO) which was considered to be India’s largest, Paytm’s top officials held a 90 minutes call with the investors and analysts on Saturday, closely studying the business model and raising questions on monetization.
With officials doing enough to ease the doubts on revenue streams and profitability prospects will be witnessed with the markets being reopened. Besides, One97 Communications, the parent of the digital payment company, concluded with 17% below its offer price of Rs 2,150 ($28.68) in the last week, falling to as low as Rs 1,271 at one point.
Reportedly, over the weekend the parent company suffered a loss of Rs 4.74 billion in the July-September quarter from a year ago in the middle of rising expenses. Revenue increased over 60% in the same period, being boosted by growth in financial, commerce and cloud services.
“Strong momentum in revenue growth will continue,” said Madhur Deora, the Chief Financial Officer in the call. Contribution margins jumped “with clear trends towards continued year-on-year improvements,” he said referring to a presentation that was later filed to stock exchanges.
Meanwhile, Paytm’s CEO Vijay Shekhar Sharma focussed the company’s ramp-up in the key segment of lending which includes a vital and fast-growing market in credit-starved Indi, where digital financial services like Paytm are serving millions of customers and merchants.
“We are fully committed to head down and execute and deliver great results quarter-on-quarter, year-on-year forward on that,” Sharma said in his opening comments.
Kranthi Bathini, an equity strategist with WealthMills Securities Pvt. Ltd stated that Paytm’s number did not appear to be encouraging enough in the recent level.
“It is in the growth phase so costs will remain high but it will have to draw a line on how much cash they can burn,” Bathini said. “It is a big brand and it is important they create synergies between businesses. It will have to ensure that productivity starts showing up in earnings going forward.”
Though Paytm raised $2.5 billion in its IPO, its debacle of a debut made it one of the worst initial showings by a technology firm giant since the late 1990s dot-com bubble era.
“India has a large opportunity for credit and the scale-up can be huge from where we stand today,” said Bhavesh Gupta, head of the company’s lending division, on the Saturday call. “Paytm is in both the consumer lending and merchant lending, we have a two-sided opportunity.”
Besides, the financial service segments of Paytm witnessed higher revenues and profitability after volume growth, it’s commerce business which comprises stock trading, airline, and movie ticketing also recovered and higher uptake of cloud services has boosted the advertising revenues.
“Lending and advertising, in particular, are contributing a significant amount of high margin monetization,” Sharma said, even as he acknowledged competition in those businesses.
