One97 Communications (PAYTM) Q2 24/25 earnings summary

Executive summary

• Transitioned to a DLG (Default Loss Guarantee) model for merchant loans, aligning with industry and regulatory practices, with all DLG costs expensed upfront in the quarter incurred.

• Revenue for Q2 FY25 rose 11% sequentially to ₹1,660 Cr, driven by growth in payments and financial services.

• Contribution profit increased 18% QoQ to ₹894 Cr, with margin improving to 54%.

• Net profit for the quarter was ₹930 Cr, aided by an exceptional item of ₹1,345 Cr.

• Report covers consolidated and standalone financials for the quarter and half year ended September 30, 2024, reviewed by independent auditors with no material misstatements identified.

Financial highlights

• Net payment margin improved by about one basis point sequentially, attributed to better merchant monetization and payment gateway cost control.

• Payments & Financial Services revenue grew 13% QoQ to ₹1,322 Cr; Financial Services revenue up 34% QoQ to ₹376 Cr.

• Contribution margin improved by 356 bps QoQ to 54%.

• Personal loan disbursements reached ₹1,700 crore last quarter, with ongoing efforts to scale via new partners.

• Exceptional gain of INR 13,454 million (consolidated) and INR 12,581 million (standalone) from sale of movie ticketing and events business.

Outlook and guidance

• Expectation to maintain current net payment margin levels, with potential upside from UPI incentives.

• GMV growth expected to accelerate in Q3 FY25 due to the festive season.

• Ongoing cost optimization, especially in indirect expenses and technology, with further AI-driven efficiencies anticipated.

• Guidance to achieve and exceed profitability targets this year, with meaningful EBITDA margin improvements expected soon.

• Management continues to focus on core payment and financial services, with divestment of non-core businesses.