Paytm Q2 Results Review - Revenue, Gross Merchandise Value Inline; Contribution Margin Expands: Motilal Oswal

Motilal Oswal Report

One 97 Communication Ltd. reported a profit after tax of Rs 9.3 billion, aided by the sale of its entertainment ticketing business, which resulted in net gains of Rs 13.5 billion. Adjusting for the same, the net loss stood at Rs 4.2 billion, better than our expectation of Rs 6.6 billion loss.

Revenue stood at Rs 16.6 billion (largely in line), and gross merchandise value too stood largely in line at Rs 4.5 trillion (inline, 6% QoQ). Subscription revenues grew 22% YoY/3% QoQ, while disbursements saw an uptick of 5% QoQ (down 67% YoY).

Net payment margin improved 21% QoQ to Rs 4.65 billion (10 bp of GMV versus 9 bp in Q1), which resulted in an improved contribution margin of 53.9%.

We largely maintain our contribution profit estimates. We estimate Paytm to turn Ebitda positive by FY27. Also, Paytm has received much awaited approval from NPCI of onboarding of new UPI customers; we will further review our estimates and rating after getting more clarity on recovery in business volumes and growth in monthly transacting users, post this key regulatory approval.

We retain our Neutral rating with a target price of Rs 700.

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