Paytm Q1 Results Review: Recovery Begins But Weaker Profitability May Delay Breakeven

One97 Communications Ltd., the owner and operator of Paytm, is on a path of recovery, but the breakeven point is still far fetched given weaker profitability, according to analysts.

"While this quarter is likely to mark the bottom, the business has structurally weaker profitability now versus pre-regulatory action, and it will be a couple of years before it turns profitable at a profit-after-tax level," Bernstein said in a July 19 note.

"The recent up-move in the stock price was mainly due to rising hope around a swift full-business revival, which still looks distant," said Emkay Global in a July 21 note.

Paytm's net loss widened to Rs 840 crore in the first quarter from Rs 551 crore in the previous quarter, according to an exchange filing on Friday.

Its business revenue fell 34% sequentially to Rs 1,502 crore. Here, the revenue from payments services stood at Rs 900 crore, and that from financial services stood at Rs 321 crore.

The Ebitda loss for the quarter stood at Rs 792 crore, compared to Rs 223 crore in the previous quarter. The Ebitda loss before ESOP, however, stood at Rs 545 crore in the quarter ended June.

Here is what analysts said about Paytm's Q1 results:

• Payment processing margin declined to approx. 3 basis points due to the termination of high-margin products like wallets, fastTags, etc.

• Indirect expenses rose 10% quarter-on-quarter due to increased marketing and software/cloud spends on account of the migration to the TPAP model.

• Expect an approximate 55% decline in loan disbursals for FY25 to be offset by a higher take-rate.

• Expect payment processing margins to settle in the 4-6 bps range.

• Estimate Paytm to turn profitable in Q4 FY26 on a sustainable basis, which would be a slightly delayed path.

• Maintain an 'outperform' rating with an unchanged target price of Rs 600 apiece.

• Higher retrenchment and savings on salary/ESOP costs led to a lower net loss.

• A meaningful revival in the lending business looks like a far call due to continued partner and regulatory concerns.

• Average consumer MTU declined to 7.8 crore in Q1, and regaining this would be a difficult and expensive task after the company gets a nod from NPCI to onboard new customers.

• There is some relief in the merchant payment/device subscription business, and the latter's merchant base expands

• Fresh loan disbursement fell 66% year-on-year to shift towards a distribution-only model.

• Even though running pilots for secured business is unlikely to gain scale in the near term

• Long-pending FIPB approval for investment in a payment subsidiary, which is expected in the near term, could be sentimentally positive.

• Maintain 'reduce' rating with a revised target price of Rs 375, implying a potential upside of 25%.

• Broadly in-line numbers for Q1, but business metrics were muted due to the full impact of the RBI's curbs being visible.

• Contribution margins declined due to a decrease in payment services to consumers.

• Expect Paytm to turn Ebitda positive by FY27.

• Estimate approx. 20% CAGR in disbursements from FY26.

• Expect take-rate to moderate as the company forays into secured products and earns lower collection incentives.

• Expect payment processing margins to moderate to 5–6 bps due to the discontinuation of some profitable products.

• Maintain 'neutral' rating with a revised target price of Rs 500, implying a potential upside of 15%.