Looks like now they will be stopping Paytm Postpaid this was expected as they had hinted about stress in this book, lets see if going into PL and SME helps them get higher margins cause they are higher size loans but the market size shall reduce drastically as they can only target merchants and customers with good credit profile so they will be in direct competition with banks and NBFCs, also earlier they mentioned Postpaid as a part of funnel which they provide to customers and based on their behaviour they would be giving higher ticket loans, so I think the business of Paytm is more like an NBFC as their payment business does not have any meaningful take rates to earn money and also now their market size has reduced drastically and is in direct competition with other financial institutions, will be listening the next earnings concall and also I think the stock is basically a story stock without any fundamental business model so will have to watch if management walk the talk to even consider entering the stock.
However, the counterargument suggests that banks and NBFCs are clients rather than direct competitors. The niche business model assists banks and NBFCs in identifying creditworthy customers. While the management could aggressively acquire customers in the low-ticket loan segment, they refrained from doing so due to concerns about the potential long-term impact on their asset quality. This decision itself indicates that the management is on the correct path.Furthermore, the take rate is higher in large-ticket size loans compared to postpaid types. From a long-term perspective, the minimal impact on revenue is a result of this decision.
Hello
Why is the slowdown in lending being considered as a permanent thing? Are we assuming that RBI will continue to discourage BNPL as a category of lending in the country? May be fellow boarders can share some policy document which claims so.
I do not see any reason for Paytm not to continue to lead in the BNPL category. And in my opinion there does not seem to be any long term reason for BNPL to not be a part of the overall lending mix in the country.
I think they have shut Paytm Postpaid which was their BNPL and are focusing on Personal Loans.
In an analyst call, Paytm informed about moving away from postpaid (essentially the BNPL loans) and personal loans below Rs 50,000. Instead, it wants to focus on higher ticket size personal and merchant loans (in the range of Rs 300,000 to Rs 700,000).
In my opinion, that is a temporary response to the RBI asking everyone to reduce low ticket unsecured lending. It does not mean that low ticket unsecured lending will never come back. I guess we will have to wait and watch.
Does this mean we can rely on Moneycontrol?
Good set of numbers (Better than street estimates)
Consolidate revenue up 38% YoY and 13% QoQ (2850 Cr)
Losses have narrowed down to 222 Cr
Merchants subscription is 1.06 Cr(Up 49 lakh YoY)
But the key metric here is the loans distributed-15,535 Cr
It is down from previous quarter of 16,621 Cr but seems minor impact due to RBI restrictions on the less than 50,000 size loans
It needs to be watched out in future quarters but as of now it does not seem as big an impact as the street expected
The impact should be visible in Q4 results because RBI directive came in first week of December and hence Q4 would be the first quarter impacted. Though the Company is upbeat about increasing the higher ticket loansâ disbursal in the near future. Indeed, it is a key monitorable.
On a cash basis, I think the company is now generating cash. They issues ESOPs worth 385 crores this quarter. But that is a non-cash expense. Even after accounting for depreciation, they still generated net cash.
Hoping to see the operating leverage play out from here on.
3Q FY24 Few good Points in below article
Paytmâs parent company One97 Communications expects wealth management through futures and options (F&O) and equity trading to become a big part of financial services distribution revenue in the next 12-18 months, its president and chief operating officer Bhavesh Gupta told analysts on Saturday.
Read more at:
Often, what a company doesnât do tells a lot about it than what it says it does. So here are a few such things from the PayTM concall:
- We do not offer loans for merchants who have not been on our platform using devices consistently at least for a period of six months.
- We donât intend to have a balance sheet. We are a technology company⌠we would love to work with the lenders and the wisdom that they have of doing credit over so many yearsâŚif they feel comfortable doing more, we would do more. If they feel comfortable to do less, we will do less.
- Why not rope in a different set of partners for postpaid who are willing to take higher risk? Answer: I donât think as a strategy, we want to arbitrage and move to a partner who could technically say, âHey, Iâm happy to take this risk and letâs do business with â you can do business with me.â Our belief here is that we would love to build a business which on an overall basis is aligned to the way the regulatory thinking and the lenders are thinking. So, if there is a concern either regulatory or otherwise, we would like to play with that and make sure that unless and until the overall macro environment and regulatory environment is positive, we are not necessarily going ahead and building this business at a scale that we were building earlier.
- Donât want to give PAT guidance though we expect to be PAT positive in near future.
- Will have only a moderate expansion of the sales force going ahead⌠we donât necessarily need to add more people to grow.
- We can move a customer from one lending partner to another. There is no contractual restriction, but we do not do that unless the other lender is okay. We do not necessarily play on contracts; it is in the spirit of partnership.
I must say I agree with all of the above as a sensible business strategy.
Finally, a key point that is often missed (or underrated), which I have written above earlier also: Why anyone will take loan through Paytm app when they already have pre-approved lines of credit from their banks?
People are not necessarily aware or that much used to using their bankâs platform or lending partner platform that actively versus how theyâre used to using Paytm platform. The accessibility of the app makes all the difference, our product efficiency is completely digital and very instant. What we are changing is availability. 10 crore people are able to see the icon to get credit.
(Disc.: Holding)
Big News
This looks pretty serious. RBI does not seem to have revealed the kind of non-compliance or any remedy. I wonder if it means effective cancellation of Payments Bank license. Awaiting clarification from the company.
BTW, here is the official RBI press release that mentions the action against Paytm Payments Bank: Reserve Bank of India - Press Releases
This is indeed serious and this has been on the wall for quite some time. Although the degree of harshness by the regulator is bit surprising. Multiple times RBI had barred Paytm Payments Bank from onboarding any new customers, the last being from 2022. Other than that the compliance issues in Fastag, then findings in audit report, compliance issues by RBI related to KYC have always been there and has eventually led to this. This looks like effective end of the Payments bank as well as the wallet (unless company clarifies that RBI has given some deadline to correct the compliance shortcomings). Other than this the lending business looks to be in stress where it is visible on the defaults reported, and the stoppage of postpaid loans is also going to reflect in next quarterly report. There is a high chance that the lending partners will now want to distance themselves and that is going to lead to even higher defaults and higher wealth erosion in this scrip. If this happens then it is going to take years for the stock to recover. Wonât be surprised if the stock opens with a lower circuit and continues to do so for next few sessions.
Hope to be proven wrong for the sake of huge workforce employed by Paytm.
Other than the 2022 instance, what were the other RBI impositions? can you share the links/pointers?
Here is the link of the Press Release : -
may be i am small to understand something but i always wonder why more than 10 lac people (no. of share holders) are not able to undrstand Paytm is complete trap. there is no room for margins and they are paying huge huge price for nothing.
why not PSU banks , where corporate governance and huge underlying values are there. many baks availabe at 5 to 10 PEs and 3% + div yields.
small investros pls stay away from this trap.
Disc. not invested