PAYTM - One 97 Communications Limited Share Price

Management provided a positive outlook for Paytm, emphasizing significant growth opportunities through its financial services and AI integration. CEO Vijay Shekhar Sharma highlighted the company's intent to enhance its AI stack, indicating that it not only aims for cost savings but also intends to create new revenue streams. The focus will be on using AI in product development and features, with the goal of expanding in both local and global markets. Sharma noted, "the future growth of Paytm in revenue and bottom line is going to come from India's expansion of financial services" and the replicability of its technology globally.

Sharma mentioned key metrics for their postpaid product, with current numbers reportedly averaging tens of thousands, and highlighted the potential to scale beyond previous peaks in customer bases, suggesting targets of millions. Additionally, he noted the growing traction in their merchant loans, with no current constraints regarding capital from bank partners, indicating a robust framework for scaling this product quickly.

Furthermore, the company is optimizing its payment margins via enhanced merchant offerings like EMIs and is set to expand into international markets, aiming to partner with local entities while maintaining a technology-driven model. Overall, the management expressed excitement about the prospects for AI-enhanced services, stating that AI "will be a revenue line item," while forecasting a continued trajectory of scale and monetization from its robust user and merchant base.

In terms of performance, Sharma highlighted promising returns from the festive season and noted that the company's financial services division is experiencing a structural growth rate improvement, projecting a potential revenue growth acceleration from the current 24-25% range towards 30% or higher in the medium term.

Earnings Call Q&A Summary

Q1: Mr. Pranav Kshatriya: What is the scaling up of Postpaid and your roadmap with bank partners?

A1: Our goal is to democratize financial services, with Postpaid as a key aspect. We're collaborating with a limited number of banks currently, but there's substantial potential with our existing partner. The current numbers are encouraging, and we aim to eventually expand our customer base significantly.

Q2: Mr. Pranav Kshatriya: How much of the growth in net payment margin is from subscriptions versus payment processing?

A2: Growth largely comes from credit instruments like EMI, especially during the festive season. Our margin on payment processing has seen an uptick due to strategic partnerships and disciplined pricing, which should sustain in upcoming quarters.

Q3: Mr. Pranav Kshatriya: What's the outlook on indirect costs?

A3: We anticipate these costs to remain stable for the rest of the year. We see room for reducing non-sales-related expenses while selectively investing in sales personnel, thus improving efficiency.

Q4: Mr. Pranav Gundlapalle: What's driving the slowdown in marketing revenues, and what's the outlook on BNPL unit economics?

A4: Advertising, particularly in travel, has faced industry headwinds. However, our marketing strategy is evolving, and we expect growth as we focus on effective upselling. BNPL economics remain healthy, with minimal changes compared to our previous product.

Q5: Mr. Sachin Dixit: What's driving the operating cash flow conversion dip?

A5: Variability in cash flow is partly due to settlement timings and holidays. It's essential to assess operating cash flow over weeks rather than quarters. We can discuss specifics offline.

Q6: Mr. Sachin Dixit: How sustainable is the improvement in payment processing margins?

A6: We believe this improvement is sustainable as we continue adjusting product mix. New online merchant acquisitions will enhance margins.

Q7: Mr. Sachin Dixit: Will AI be a cost or revenue driver?

A7: AI presents major revenue opportunities through innovative products while optimizing costs. We are excited about new functionalities and the potential to enhance service across various merchant segments.

Q8: Mr. Rahul Jain: What's the strategy for improving MTU (Monthly Transacting Users)?

A8: We're focusing on higher-value customer retention and simplifying app experiences to enhance monetization. Launching products like gold coins attracts more customers leveraging existing relationships.

Q9: Mr. Piran Engineer: How would you compare your UPI credit card market share?

A9: Our UPI credit card market share is better than our general UPI share. We're confident in our positioning as more merchants adopt these payment options.

Q10: Mr. Prateek Poddar: What's the timeline for scaling Postpaid given the customer base?

A10: We see a substantial opportunity and will focus on customer acquisition without rushing the process. We aim to reach previous peaks cautiously, learning from past experiences.