News Update

According to Paytm CFO Deora, the payments division is still the most lucrative

• ByStartupStory     |    February 7, 2022

The parent organization of Paytm, One97 Communications Ltd, seems to have had a rough time on the stock market, with its valuation plummeting by more than 40% since it went public in November. The fact that Paytm’s anticipated revenue growth did hardly justify the hefty premium its shares commanded has been at the core of the market’s unhappiness. Analysts at Macquarie Capital flagged this up in a letter in January when they cut the company’s target price. Macquarie reportedly lowered Paytm’s target price to Rs 700, citing costs associated with employee stock options (ESOP).

According to experts, regulatory changes, as well as heavy competition in the payments market from huge international corporations, might cause revenue issues. The payments company’s quarterly net loss expanded in the fourth quarter, although revenue growth was solid.

Paytm’s most expensive item is its payment processing fee. Their contribution margin has increased from 9% to 31%. According to him, indirect expenditures increased by 52%. Nothing is standing in the way of investment in any field. They are investing in important things. This is just the platform’s power: while sales rise, costs rise as well, albeit by a far smaller amount. Marketing costs make up a small percentage of overall costs. Paytm isn’t scrimping on its investments.

Madhur Deora take on the company is expandation and Paytm not receiving more bang for its dollars is not the correct approach to view the business since it indicates that some GMV with a low or zero take percentage should indeed be avoided. Any form of GMV as long as they make a profit on it, or even if they do it with no margin. He declares that “We bargain for lower prices”. Growing GMV effectively leads to platform expansion, which leads to several monetization options. Simply because the platform has a given take rate does not mean you should avoid every GMV with a lower take rate. Paytm wants to provide clients with a wide range of items.

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