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The payments business is the one that remains profitable, claims Paytm CFO Deora.

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According to Chief Financial Officer Madhur Deora, payment services to merchants and consumers brought Paytm more than $1000 crore in revenue during the 3rd quarter of this year’s financial year. “Nobody does Rs 1,000 crore revenue in India fintech today,” Deora stated.

One97 Communications Ltd, the parent company of Paytm and Paytm Mobile, has endured an extremely rough ride in the market, with its stock dropping more than 40% since it went public its store on exchanges back in November. The root of the market tensions is that the potential for Paytm’s revenue growth didn’t justify the high price its stock earned. This was noted by analysts from Macquarie Capital when they slashed its target price in a January note. Macquarie has also reduced the price it is targeting Paytm by 700 rupees due to the costs associated with employee stock option (ESOP).

Changes to regulations and the fierce competition in the payments industry from multinational companies could create revenue challenges, as per analysts. The payment provider’s quarterly net loss and robust revenue growth increased during December.

Interview of Aparna Iyer, the group’s Chief Financial Officer Madhur Deora, claimed that payments are the highest-profiting segment for Paytm and that the company will prove this over time. The following excerpts have been edited:

Can it be true that the capacity to generate revenue for the payment space is declining?

The opposite is true. Our merchant payment services have grown 117 percent from year to year. The number of consumers who used our services for payment increased 60% year on year. I’m sure that the last three-quarters of investors were skeptical about this since we didn’t have any figures to support it. The pandemic also occurred in the two years before that. It was hard to quantify the typical growth in payments. We’re seeing that the sum of the two categories (payment services to merchants and consumer services) will be more than Rs. 1,000 crore in revenue for the third quarter of this year. No one makes more than more than Rs 1,000 crore in India today.

Do you think that different payment options will prosper side-by-side and not compete?

It’s as simple as looking at information. Credit cards, debit cards, credit cards, and UPI (unified pay interface) are all doing well. The data already tells us that card, wallet, and UPI — three are increasing. Merchants are looking to accept the payment tools that consumers want to utilize. While I can’t guarantee that every payment method will stay, some could be replaced with an upgraded version. For instance, will IMPS (Immediate Payment Service) be replaced with UPI shortly? Perhaps. In general, can the development of one instrument increase to another? Nearly in all instances, it is not the case.

How can you contact UPI?

UPI is an excellent way to acquire new customers and new merchants. It’s great for merchants as well since transactions are free. When customers become accustomed to electronic payments, their requirements will also increase as time passes. Customers are looking for convenience and higher-quality products. People may seek credit-bearing products. Customers are moving towards more and more payments instruments. There’s no market anywhere globally, and India isn’t an exception that customers are limited to one payment method. Customers make use of different payment methods to meet their requirements. Non-UPI GMV (gross product value) was up 77 percent over the year, directly translating into increased revenue. The UPI portion of GMV is growing at a faster rate. However, this isn’t necessarily an issue. UPI increasing its growth rate means two things. One is that I am receiving new customers at an affordable acquisition cost. If the customer uses UPI or any other method to generate behaviors on my platform, we can offer the customer credit items. I’d say that a person who uses UPI via Paytm can be more likely to accept credit products from Paytm rather than the credit card user. The most important thing is to bring the customer in as inexpensively and make an environment that encourages the customer to use the service.

The revenue is substantial. There’s certainly. Where is the loss for the quarter going to come from?

The losses have increased due to an accounting cost we will have to pay after our IPO. This is a non-cash expense, and nobody is spending any money. In addition to this cost (ESOPs), the growth of the EBITDA (earnings before tax depreciation, interest, and amortization) is impressive. We will eventually be EBITDA-positive. We are highly focused on this. There are tremendous opportunities, and as we expand, we see more of them. The digital ecosystem is not fully embraced at the moment. We’re determined to compete for the top prize of a massive internet-based ecosystem in the nation.

On the other hand, we are looking to become highly efficient and increase revenue. We’ll be balancing both. However, we must also keep on investing. If someone says you should put it off for two years from now but bring losses down to zero, I could accomplish that in just two quarters. But that’s not the goal. The goal is to create an enterprise that can boast thousands of customers and merchants that have various products available through your platform.

What do you have to say about this deal? Raheja QBE agreement?

We are in constant dialogue regarding the regulation. The regulatory authority has no formal, informal official, or informal indication that this deal has not been approved. This process takes time, and we’re in constant discussion.

Do you have a view on your expenditures?

Processing charges for payments are the most significant cost item. The contribution margin of our company has increased from 9 to 31. Our indirect expenses increased by 52 percent. We aren’t stopping investment in any field. When it comes to the things that matter, we are investing. This is the very nature of the platform. When revenues rise, costs increase, but in a smaller percentage. Marketing expenses don’t make up the largest share of the total cost. We’re not investing too much. I am aware of a story that says that you cut down on your marketing expenses; however, that’s not the case.

The growth is solid, but Paytm does not get more value for its money. There’s not much to report in terms of how much they take in. …?

I’ve never discussed taking rate. The people calculate this number and then expect us to achieve the required number. This is not the best method of looking at the business since it implies that certain GMVs with lower take rates or no-take rates should be avoided. So long as you can achieve a profit from any GMV and make this GMV with no margin, it is advisable to choose the GMV. We don’t have to can negotiate a price to lower prices. The growth of GMV efficiently will lead to an increase in your platform’s revenue and numerous opportunities to monetize. Simply because your platform is currently at a specific take rate, it doesn’t mean that you should not take advantage of GMV that is less than the current take rate. We are looking to provide different kinds of services to our customers. We’ll earn money from payments and make more money from commerce, finance, and cloud services. The combination of these creates a robust platform. The total take rate could rise. In the future, as more is more of these services come in, The sum of all the earnings will have a positive effect on the take rate overall.

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