One97 Communications Ltd. share price target

One97 Communications’ (Paytm) Q1FY24 results yielded three key trends: (1) increase in margins on payments; (2) lower take rates in financial services, but continued improvement in asset quality; and (3) increase in fixed costs. The overarching strategy of growth in payments and credit distribution (without FLDG) remains intact and will only likely be boosted by partner addition and improving penetration within the ecosystem.

We hosted One97 Communications (Paytm) at our Singapore conference represented by Mr. Madhur Deora, ED, president & group CFO. The positive cycle of customer growth, retention and cross-sell playing out for the company is encouraging.

One97 Communications (Paytm) has reported a strong FY23, best underlined by an increase of Rs13.4bn in EBITDA before ESOPs during the year. This was a combination of an increase in payment revenue (42% YoY), financial services (252% YoY through credit disbursement growth from Rs76bn in FY22 to Rs354bn in FY23), cloud (24% YoY) and commerce (64%) as well as an increase in contribution margin (~400bps to 49%) and controlled indirect costs (Rs10bn level for last 4 quarters).

One 97 Communications (Paytm) during its analyst meet yesterday (1st Dec’22) reiterated its continued focus on improving profitability.

One 97 Communications (Paytm) continues to improve its revenue and margin profile, evident in narrowing of consolidated loss at Rs5.7bn in Q2FY23 (vs loss of Rs6.5bn in Q1FY23).

One 97 Communications (Paytm) management team hosted a call to share their
observations and assessment on business implication regarding the regulatory framework suggested by the RBI for digital lending.