PAYTM - One 97 Communications Limited Share Price

In the earnings call held on July 22, 2025, management provided an optimistic outlook for the company, emphasizing significant growth potential and strong performance metrics. Key points from the management's forward-looking statements include:

1. EBITDA Margin Guidance: Management projects achieving an EBITDA margin of 15%-20% over the next two to three years, citing an improvement in contribution margins, now at 60%, as a strong foundation for this goal.

2. Continued Growth in Financial Services: The revenue from financial services reached Rs.561 crores, with both personal and merchant loans experiencing growth. The figures indicate a positive trajectory in the lending space, even as DLG costs decreased significantly.

3. Focus on Merchant Payments: There is a clear emphasis on enhancing merchant payments, as it is seen as the core of the business. The management plans to leverage its existing relationships and expand its merchant base, aiming for substantial growth in this segment.

4. Cost Control and Efficiency: Management mentioned that while some low-hanging cost-cutting opportunities have been maximized, they are still focused on improving operational efficiency without compromising growth. Indirect expenses have seen a reduction of around 30-35% from their peak.

5. Device and Merchant Growth: In terms of device deployment, management indicates continuing strong performance in expanding their POS and EDC offerings, planning for more active merchants that drive growth.

6. Future Products: There are discussions around consumer products and services like BNPL (Buy Now Pay Later) and wallet functionalities, which are expected to enhance the company's growth profile once personal credit recovers.

7. Operational Focus on AI: They highlighted a strategic priority towards AI integration across all customer products and internal processes to enhance efficiency and customer experience.

Overall, management appears confident in their growth strategies, aiming for sustainable profitability while continuing to innovate and expand their service offerings.

Q: Is there further room to cut costs without impacting revenue growth? A: While we can identify some areas for cost savings, they will not be significant. Our goal is not to cut costs aggressively but to invest in long-term growth opportunities. We are focusing on areas that drive revenue rather than pursuing cost-cutting for its own sake.

Q: Can you provide clarity on your lending book, particularly the mix between personal and merchant loans? A: The mix remains linear and traditional, similar to previous quarters. We're focusing on what helps our partners and their performance. Our current lenders have opted to forego DLG-based metrics, indicating confidence in overall book performance.

Q: What is your guidance for medium-term EBITDA margins? A: We aim for a 15%-20% EBITDA margin over the next two to three years. As our contribution margin is currently at 60%, we believe this goal is more achievable than before. We're transitioning to report without adjusting for ESOP costs in EBITDA.

Q: How dependent is the resumption of BNPL on your wallet product? A: The resumption of BNPL is independent of the wallet product. The primary concern is the small credit issuance under Rs 50,000, which is key to lenders. When personal credit strengthens, both PL and BNPL should recover.

Q: What are you seeing in terms of merchant loan disbursement and partner contributions? A: Our largest partner accounts for 30-40% of merchant loan disbursements. Most repeat business is done by the initial lenders due to ROFR dynamics. We're actively pursuing more lending partners to diversify and minimize concentration risks.

Q: How do you see the payments business evolving in terms of profitability? A: Our payments business is reaching breakeven and is a profitable revenue driver that will show operating leverage as we add value-added services. We expect payment revenues to grow steadily, contributing to overall profitability.

Q: What opportunities do you see for non-UPI GMV growth? A: Non-UPI GMV will grow but not particularly faster than UPI because the adoption base for RuPay credit cards is still limited. However, we're optimizing EMI and credit card offerings to enhance revenue from this segment.

Q: Can you elaborate on the economic differentiation in your EMI product versus competitors? A: Our EMI product stands out by incorporating multiple subvention parties, allowing for competitive financing options. We also provide unique offers from brands, enhancing merchant appeal while leveraging our consumer platform for value-adds.

Q: What are your goals with the new devices and refurbishment strategies? A: We aim to enhance the lifetime value of our devices while improving refurbishment efficiency. Our strategy includes active downtime reduction and maximizing features across devices. We're continuously striving for operational efficiency as we scale.

Q: What are your priorities moving forward? A: The primary focus is on expanding merchant payment capabilities and driving growth through innovative offerings such as BNPL and wallets. We're also prioritizing engagement and retention strategies that leverage AI to improve customer experiences and operational efficiency.