Paytm Q2 profit jumps 10x to ₹225 Cr as AI cuts costs, UPI share grows

Paytm’s September quarter results, reported by Inc42, showed a sharp rise in net profit to ₹225 crore, up from ₹21 crore a year earlier. Revenue grew 28% year-on-year to ₹2,648 crore, while total income reached ₹2,830 crore. The company’s expenses rose at a slower pace—23% to ₹2,531 crore—with payment processing charges, its largest cost, increasing 28% to ₹805 crore.

The company highlighted artificial intelligence as a key driver of margin improvement. Software, cloud, and data center costs surged 59% to ₹211 crore, reflecting higher AI usage, but indirect expenses as a share of revenue fell to 46% from 52% a year earlier. Paytm expects these efficiencies to continue for at least another quarter. EBITDA for the period rose 90% year-on-year to ₹270 crore.

Net payment revenue, excluding PIDF incentives, rose 21% to ₹644 crore, while margins expanded by over four basis points due to a higher share of credit card transactions on UPI and Paytm Postpaid. The company’s Postpaid product, relaunched earlier, saw improved performance and is expected to contribute more meaningfully to revenue and EBITDA starting FY28.

Beyond payments, Paytm’s financial services distribution revenue climbed 49% to ₹912 crore, with key customer numbers rising 35% to 8. 8 lakh. Merchant loan disbursements remained steady, with a significant portion going to repeat borrowers.

On the consumer side, monthly transacting users (MTUs) grew by 1 crore year-on-year to 8. 5 crore, the largest annual increase in nearly three years. UPI gross transaction value rose 42%, outpacing the industry’s 19% growth for the sixth straight quarter. Paytm has downplayed its reliance on merchant discount rates (MDR), stating its business model focuses on acquiring customers through payments and monetizing through financial services. Any MDR on UPI would be an upside, not a foundation, it noted.

The results align with a broader trend of improving profitability in India’s fintech sector. Earlier this month, Groww reported a 54% jump in net profit to ₹725 crore, while Aye Finance saw its profit surge 151% to ₹87 crore. Paytm’s performance stands out for its operational leverage—cost controls, higher-margin credit products, and diversified revenue streams. However, the decline in PIDF incentives, from ₹74 crore a year ago to ₹12 crore this quarter, suggests a fading tailwind from government subsidies. Meanwhile, competition in UPI and merchant lending is intensifying, with rivals expanding their own financial services offerings.

The question now is whether Paytm can sustain this momentum. The company’s AI investments are a bet on long-term efficiency, but their impact will be tested as revenue growth moderates. The Postpaid relaunch and higher-ticket merchant loans could help, but execution risks remain. Whether this marks the start of a new phase or a peak in a volatile sector remains to be seen.

Sources: inc42.com