One 97 Communications Limited (Paytm), India's leading digital payments and financial services company, has reported strong financial results for the quarter, marking a significant turnaround with its first-ever quarterly profit since its November 2021 listing.

Financial Highlights

• Revenue Growth: Paytm's operating revenue surged by 28% year-on-year to ₹1,918.00 crore, driven by an increase in merchant subscriptions, higher Gross Merchandise Value (GMV), and growth in financial services distribution.

• Profitability Achievement: The company reported a Profit After Tax (PAT) of ₹123.00 crore, a remarkable improvement from a loss of ₹840.00 crore in the same quarter last year.

• EBITDA Performance: Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) turned positive at ₹72.00 crore, with a margin of 4%. The company targets a 15-20% EBITDA margin over the next two-three years.

• Contribution Profit: Paytm's contribution profit rose by 52% year-on-year to ₹1,151.00 crore, with the contribution margin expanding to 60%, up 10 percentage points from the previous year.

Operational Metrics

• Merchant Base Expansion: Paytm's merchant subscriptions, including devices, reached an all-time high of 1.30 crore, adding 21 lakh subscriptions year-on-year. The company's point of sale devices business crossed 1 million units, gaining market share in the segment.

• GMV Growth: The company's Gross Merchandise Value increased by 27% year-on-year to ₹5.39 lakh crore.

• User Engagement: Monthly Transacting Users (MTU) averaged 7.40 crore for the quarter.

Segment Performance

Payment Services

Revenue from payment services, including other operating revenue, grew by 23% year-on-year to ₹1,110.00 crore. Net payment revenue increased by 38% to ₹529.00 crore. The payment processing margin was 3.7% on a consolidated basis, above the guided three-basis-point margin.

Financial Services

Distribution of financial services revenue doubled year-on-year to ₹561.00 crore, driven by expansion in merchant loans and improved asset quality. The company discontinued its buy now, pay later product due to its unsecured nature, though management expects the consumer credit business has bottomed out.

Commerce and Cloud Services

Marketing services revenue stood at ₹247.00 crore for the quarter.

Management Commentary

Vijay Shekhar Sharma, CEO of Paytm, emphasized that the payments business remains profitable without merchant discount rates and sees a 4-5x growth opportunity in India's payments ecosystem.

Group CFO Madhur Deora expects considerable margin improvement by the current financial year's end.

Outlook

Paytm expects to maintain its growth momentum and profitability in the coming quarters. The company aims to further expand its merchant network, enhance its financial services offerings, and leverage AI to drive operational efficiencies.

With a strong cash balance of ₹12,872.00 crore, Paytm is well-positioned to invest in growth opportunities and continue its market leadership in India's digital payments and financial services landscape.

As Paytm transitions into a profitable entity, it sets a new benchmark in the Indian fintech sector, demonstrating the viability of its business model and the potential for sustained value creation in the digital economy.

One 97 Communications , the parent company of Paytm, has seen its stock price rally significantly over the past year, despite still trading below its initial public offering (IPO) price. The company has also recently approved a new round of stock options for its employees, signaling confidence in its future growth.

Stock Performance and Technical Analysis

Shares of Paytm have demonstrated remarkable strength, surging 122% over the past 12 months. The stock is currently trading around ₹1,018.00, showcasing a strong recovery trend. However, it's worth noting that the current price still remains 53% below the IPO issue price of ₹2,150.00.

Technical analysts have observed promising patterns in Paytm's stock chart:

• The stock is forming higher highs and higher lows, a bullish indicator.
• It's approaching a resistance zone of ₹1,020.00-1,030.00.
• Paytm shares are trading above their 20-, 50-, 100-, and 200-day exponential moving averages (EMAs).
• The Relative Strength Index (RSI) stands at 65.86, indicating strong momentum without being overbought.

More advanced technical patterns have also emerged:

• A Cup and Handle formation is visible on the weekly charts.
• An Inverted Head and Shoulders pattern has formed on the monthly charts.

These patterns suggest potential for further upward movement, with some analysts projecting a possible target of ₹1,700.00.

Financial Outlook

While the company is currently not profitable, brokerages are optimistic about Paytm's financial future. Analysts expect Paytm to report its first-ever profit in Q1FY26. Projections indicate a potential profit after tax (PAT) exceeding ₹18.90 crore, compared to a net loss in the same quarter of the previous year.

Revenue from operations is anticipated to grow by 27% year-on-year, primarily driven by expansion in the payments and financial services segments.

Employee Stock Option Plan (ESOP) Update

In a recent development, Paytm's Nomination and Remuneration Committee has approved the grant of 93,244 stock options to eligible employees under its One 97 Employees Stock Option Scheme 2019 (ESOP 2019). This decision demonstrates the company's commitment to aligning employee interests with long-term corporate goals.

Key details of the ESOP grant include:

• Exercise price set at ₹9.00 per stock option
• Each option is convertible into one fully paid-up equity share with a face value of ₹1.00
• Options can be exercised during the entire period of continuous active employment from the date of vesting

Additionally, the committee noted that 128,789 previously granted stock options have lapsed in accordance with the terms and conditions of ESOP 2019.

As One 97 Communications continues to navigate the competitive fintech landscape, investors and analysts will be closely watching its progress towards profitability and its ability to maintain the strong momentum in its stock price.