Fintech major Paytm will announce its first-quarter earnings on Friday and analysts are expecting a steady sequential growth in revenue, while faster growth in financial services will be offset by seasonally weak commerce business and lower payments revenue.
The lower payment revenue is mainly due to the high base in the preceding March quarter as the company received UPI incentives.
Overall, estimates are mixed on the revenue front, with some analysts expecting a growth of up to 14%, while others are penciling in a flat or even decline during the first quarter.
YES Securities expects the revenue to grow up to 14% quarter-on-quarter, while DART and Axis Capital are seeing a marginal drop.
For the quarter ended June, Paytm has already reported 37% year-on-year (YoY) growth in its GMV (gross merchandise value), while the average monthly transacting users went up by 23% YoY.
The lending business, which the company is betting heavily on, recorded disbursements of Rs 14,845 crore, a YoY growth of 167% in Q1.
The June quarter losses are expected to decline over the previous year’s period but may rise when compared with a quarter ago.In the preceding March quarter, the payments provider narrowed its loss significantly to Rs 168 crore from a year ago, while revenues jumped 52%. At the operating level, the company managed to rebound and reported an adjusted profit of Rs 101 crore.
Here’s what brokerages expect from Paytm’s Q1
We forecast payment processing charges (PPC) as a proportion of payments revenue to be at 62%, a metric that was 54% in 4QFY23 due to the UPI incentive.
We arrive at a total Expenses (ex-PPC) growth of 9% QoQ, compared with a growth of 2% in 4QFY23, resulting in an EBITDA margin (ex other income and after ESOP cost) of -7.8%, a deterioration of -227 bps QoQ as Paytm had received UPI incentives in 4QFY23.
We expect a decline of 1.7% QoQ growth in revenue due to lower growth in the merchant payment business. EBIT sequential decline primarily due to a base effect of UPI incentive in Q4 of Rs 49 crore.
PAT loss expected of Rs 370, due to lower OI and higher tax outgo.
The brokerage expects opex to be higher on the back of an increase in marketing and promotional expenses along with higher employee costs (appraisal, staff addition).
Contribution margin to be steady QoQ at 51% (ex-UPI incentives) helped by lower processing charges.
We expect total payment services revenues to remain flat largely due to the higher base of Q4FY23. Revenues from financial services are expected to grow 12% despite an 18% QoQ increase in the total value of a loan disbursed in Q1FY24.
We are currently expecting flattish revenue in the cloud business. Total fixed can increase due to inflationary trend as a result of which expect an EBITDA of Rs 72 crore against Rs 100 crore in Q4FY23.
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