Continuing with my attempts to gather tidbits of information on PayTM to build a better picture:
Based on limited interaction with PayTM employees/ex-employees, my take away is that company currently does not have what it takes to succeed as a financial giant in the medium to long term. Culture exhibited by top leader is still like that of startup and that of Lalla driven company (if i dont like you, you may be kicked out!). Attrition is very high at mid to higher management level on the financial side of business with a fair number of people quitting in less than a year. This will clearly hamper creation of necessary systems and risk frameworks for financial institution to survive the shocks and downside
For some strange reason (and I could be completely wrong here), I get a feeling that PayTM is considering to slow down and do a calibrated growth on lending for next 2-3 qtrs. This feeling was developed by reading a para in one of their press releases (released on 5th July) âOur focus remains on the asset quality by continuously reviewing with our partners cohort data and tightening credit policy wherever needed proactively. This reflects in the growth of value of loans distributed in the quarter.â
Loan disbursal may show more growth during the festival season, but as mentioned in my earlier post unless they get more partners (and hence more money to loan) the explosive disbursal growth can slow down relatively.
Quantum of ESOP over next 3-5 years is another thing to factor in. I have not yet found all details on ESOP but it looks to be very high. If that is true, EPS dilution will continue for a medium term. Markets may ignore ESOP issues and ride high on âAdjusted Ebitdaâ during bull run but eventually it will factor it in long run (my personal view)
Just my 2 cents!
Disclaimer: Was invested for a short period, moved out as I found better medium term opportunity. Views can be biased and I am susceptible to errors of judgement and willful blindness. Please do your own due diligence on buy/sell decisions.
Does this raise any red flags? On the quick check, it doesnât seem so. PwCâs contract term of 5 years ended and Paytm appointed a new auditing firm.
One +ve thing is that the biggest investor is ready to let go of their voting rights in order to maintain their shareholding + They trust VSS + VSS in way giving them floor as OCD price is fixed so if they do not convert - VSS need to pay them in full and if Paytm stock price does well, they convert into equity and take full upside. This means VSS is confident about company (may be far fetched?).
and also this could be in relation to PA license for which it has application with government (due to itâs shareholding) so this changes might have inspired from their.
About auditor changes - I think it is good as parent company auditor canât write that they have not audited company and relied on supplied information by management and other auditors.
Is anyone know what UPI incentives Phonepe got for last FY compared to Paytm as it will make it clear who is leader in merchant acquisition? or list where we can find UPI incentives amount and company name. Thank you!
Many people assume that soundboxes are a gold mine for payment companies and present a billion-dollar opportunity to expand their bottom line.
However, everything that shines isnât gold. Neglecting the popular belief, the soundbox business doesnât make much money and brings losses to the payment companies.
Presenting an article to showcase the reason why and who is actually benefitting from these soundboxes.
A few notable points from the PayTM Q2 FY24 concall (E & O.E.):
Personal Loans: This quarter is the lowest growth Q-o-Q both in value as well as volume perspective. A couple of quarters back, we saw some early signs of stress in the PL portfolio, so we decided to go slow on it. Here, we have more than Rs 300 - 400 crores of portfolio which gets matured every month which is available for further upsell through our partners. So that is one bucket which is growing Quarter-on-Quarter and in the next two quarters we will see the renewal opportunity available to fully matured loans will be much higher than what we have seen in the last two quarters. So here you will see growth in early double digits but not like what it was in the past. (Elsewhere, he mentions 30 to 40 % is what we can expect). Ticket sizes will be a bigger contributor to growth than volume.
Post Paid and Merchant Loans: Continue to see healthy growth. Merchant Loans will grow 50 to 60 %. Out of the 41 million merchants that we carry online and offline, more than 20 million merchants have signed up to accept postpaid. Not all of them obviously pay MDR. The number of merchants who are paying MDR is less than about a million.
Lending Partners: Added Tata Capital as another lending partner taking overall partners to 9. Shriram Finance will go live in early November. In the next two quarters, we will add another three partners, of which one or two would be banks. Jio is not a threat. We are a large platform who can originate good quality credit for more and more partners. We see any new player coming in as a collaborator rather than a competitor.
Overall, for Lending business: For our credit business to grow, we do not need incremental consumers on our platforms. It is better for us to penetrate the existing customer base instead of acquiring new consumers. Overall, anything between 40-50% on a blended basis over the next 2-3 years should be the growth that we should start seeing from hereon. We believe that a stable case financial services take rate is in the vicinity of 3.5% to 3.65%. We continue to add about 400,000 to 500,000 new customers who are taking credit of any kind through the Paytm platform with different partners of ours every month. We are very conservative and strict as to which kind of users or merchants get access to credit. That filter remains common irrespective of new partner or old partner and once the merchant or user passes that filter then the filter of the lender comes into play where they are looking at underwriting. We currently service more than 250 towns for personal loans and merchant credit and more than that for Paytm postpaid. This year we would be adding another 50 to 60 towns.
Cloud Business: This is mainly co-branded credit cards and advertising. On e-commerce side, our GMV is now Rs.2900 crores roughly which is up 39% Year-on-Year and take rates have been in the range of 5% to 6%.
Payments: We are serving 500 locations for Payments business and will be adding 50 to 100 towns this year. Net payment margin will remain range bound between 7 to 9 basis points. Cross-border UPI will take some more time to scale up.
On devices and Soundbox: Capex is majorly for devices. We have innovated on sound, cards, QR etc. and have furthermore plans and roadmap ahead. Realisation on devices is around Rs.100 on a blended basis though some high-end soundboxes may cost upto Rs.1200 per piece and card machines cost about Rs.5,000 to Rs.7,000. We will continue to increase manpower on distribution as we want to dominate the acquiring side of the business. We aspire for around 1.5 million a quarter kind of deployment rate over the next 12 to 18 months for soundbox and card machines. There is a sales force of around 35,000. We do not see this plateauing for the next 3 years. Close to about 15 to 20% of that is involved in servicing but servicing is not just going and servicing the device. It is also to do with merchandising, branding, managing what is called âon the shop queriesâ and then obviously managing device servicing etc.
Operations: When somebody takes a loan on the Paytm app, our lending partner does the KYC for the customer.
Employee costs: For the year, ESOP costs will be similar to last year. On the sales side, employee costs will continue to grow rapidly while on the non-sales side, growth will be more muted.
Miscellaneous: Wealth business (e.g., broking, ETF etc) has a huge opportunity and is one of our future long-term bets. PayTM Money is a fantastic business, very high margin and if you can run it at a very low cost of customer acquisition then it is a very good business. We see a huge opportunity in Paytm Money to continue to grow trading and investing in the country and it is financially becoming much sounder than it was 2 or 3 years ago. Paytm Payment Bank had good profitability last quarter and our Gaming JV which is first games which we own 55% of that also had improved profitability last quarter. On ONDC, currently there is an invitation kind of pricing. In the long run, we would prefer a subscription-based pricing model rather than MDR model. Cash in hand is Rs.8,750 crores.
I have read the Annual Report concalls and DRHP of the company but I still do not understand the business model of the company, it was first bulling on PL and postpaid but then they see stress in it and I do not think they make much money through take rates on bill payments, what exactly is their business model can somebody explain?
Though it is for the 1st transaction, since we use upi everywhere and most of the transactions will be 1st time like walking into mall, using upi for higher ticket purchases. Not sure exactly how this will be this implemented but imagining that you wonât be able to confirm that money is in your account for next 4 hrs (or even if you receive, the fact that it could be reversed) could potentially impact the use of UPI. ( this wonât have much impact if you could do multiple transactions of less than 2k) but if total amount is capped at 2k for 4hrs this could have major impact i guess
In their recent concall they mentioned that they do not grow personal loans and other credit offering as they see it risky so in that case is soundbox only their only focus area?
Can someone on the forum help me understand Paytmâs payment aggregator license situation? They kept applying this year and last year, but to no avail.
What exactly is preventing them from getting their PA license, and are they in a position to again reapply for it?
