Good morning, everyone. Thank you for joining. Welcome to Paytm's earnings call to discuss our financial results for the quarter and year ending March 31st, 2026. We will start the call with Q&A after introduction to the management. From Paytm's management, we have with us Mr. Vijay Shekhar Sharma, Founder and CEO; Mr. Madhur Deora, President and Group CFO; and Mr. Anuj Mittal, SVP Investor Relations. A few standard announcements before we begin. The information to be presented and discussed here should not be recorded, reproduced, or distributed in any manner. Some statements made today may be forward-looking in nature. Actual events may differ materially from those anticipated in such forward-looking statements. Finally, this earnings call is scheduled for 45 minutes. A replay of this earnings call and transcript will be made available on the company's website subsequently.
If you seek to ask a question, kindly utilize the Raise Hand feature on your Zoom dashboard. Please ensure that your name is visible as your name, last name, followed by your company name, for us to be able to identify you. We will unmute your line and take questions in the respective sequence of the raised hands. I would request if all folks can limit their questions to two. We will start our Q&A now. I'm just waiting for the queue to line up.
There is a queue . Hi, good morning. Thank you for joining us early in the morning. Like I say it all the time, you may not switch on the video because I understand this is early in the morning. That's very much fine. Keeping the tradition, we are on switch-on video. At the same point of time, this time we changed the earnings release. We tried to make it crisper. We tried to make it simpler. We tried to bring about what is important and our communication style to tune a little more about how we believe that it should be read. I'm sure you will have feedback. Love to get the feedback, and we will tune accordingly. I hope you like the ones right now. With me is Madhur here, and we can start. Thank you.
Thanks, Vijay. The first question will be from Mr. Manish Adukia from Goldman Sachs. Manish, you may unmute your line and please ask your question.
Hi, Manish. You can talk now.
I think we're facing some technical difficulty. Please allow us. Okay, Manish is here.
Hi. Good morning. Thank you. Sorry, it took me a while to get in the room. Morning, Vijay. Morning, Madhur. It's good to see you. And thank you for taking my questions. First one, maybe just on the guidance. A bit more color on the revenue growth acceleration that you've talked about in fiscal 2027. Now, I understand that, you know, at 2026 you had double-digit decline in your marketing services revenue growth. How much of the guidance acceleration in FY 2027 is just a function of marketing services revenue growth recovering versus you probably also seeing an acceleration in revenue growth across payments and financial services? Maybe a related question also on the EBITDA margins.
I know in the past you've talked about medium-term aspirational margin of 15%-20% EBITDA, and you have ended the year at about 6% with very strong expansion. Qualitatively, how far away are we from getting to that 15%, 20% EBITDA margin number? That's my first set of questions, please.
We said, talk about marketing services. Marketing services and cloud and commerce, you should remember all this combined, calls marketing services because we help small merchants, large merchants about making sure they get us from checkout to check-in. I mean, we call these services that once a customer is checking out on the shop or counter or online, the customer comes back. AI agents , this is the area of focus for us in the next 12 months, let's see how we do it. I do believe that it is an extraordinary bit of opportunity considering we've been able to take care of our core payment and financial services. It was rather about choose what is your moat, head down, execute it, then extend towards next side. If you read the intent in our AI page, it is hinting towards that.
Just to add, I think the overall acceleration given payments is about 55% of the revenue and financial services about 30% of the revenue. To answer, I think the short answer to your question is it is across the board. We are seeing strong tailwinds in payments, both in offline merchants as well as online merchants, which obviously, has a full license now and is adding new customers and so on. We are also seeing very good growth in financial services. As we had mentioned before, merchant loans continues to be solid, and we are now seeing recovery in personal loan and market share growth in wealth.
In addition to what Vijay said about marketing services and your and sort of touched your question, yes, we expect that to be a contributor going forward. It has been a bit of a drag last year, but we think the growth will be across the board. EBITDA, we will maintain about two and a half to three years from now, that we should be able to get to those sorts of EBITDA margins.
Very clear. Thank you, Madhur and Vijay. Maybe second question on financial services, which you touched upon in the earlier question. I know you stopped giving out disbursals number, but some of the Postpaid launch that you made earlier, if you can just talk about the traction this time versus the earlier Postpaid, is the traction in terms of ramp up of the product scale or disbursal tracking better or similar versus the last iteration, any differences in consumer traction? That'd be great .
Yeah. Manish, better than last time. Classic internet dissemination or diffusion of services finding it took X number of time, this is taking X by a significant large number time. It's I mean, I'm really happy, but we will not give disbursements. I think this mis-pushes us towards edges that we are a credit issuing entity, which we are not. This is the nearest most adjacent product to our payment, and I think it is doing phenomenally well. I'm not usually gonna say it is doing well, I'm gonna use the word phenomenally well. I'm very happy about it that on the back of it, our personal loan disbursements in last month, I mean, this will show up in the next quarter, have started showing up.
I mean, we have started to go back to, if you read the particular text of personal loan disbursements, it is not that we are any more measured about or limited about it is rather going next level.
Just to remind everyone, this is a classic compounding business because our sign-ups are very strong and repeat rates are very strong. It just sort of compounds upwards as you sort of just go through time. We're seeing that sort of compounding traction. This is significantly faster, as you can imagine, from the first time we started that Postpaid journey.
Sure. Just a quick clarification on that one. I know you don't give disbursements, but I recall last time when you used to give disbursements, the peak of the disbursements for Postpaid was about INR 9,000 crore a quarter. Given that you're saying that the ramp-up is actually faster, no reason why you should not get to the number at some point in time in the foreseeable future. I mean, would that be a fair statement?
No comments towards any guidance of the kind of it.
All right, great. I tried. Maybe just last question before I just jump back in the queue. PPBL ban, I know you're an associate for you don't have any management, control there. In terms of just any early impact on your listed entity, OCL, just because you share a common brand in terms of consumer merchant acquisition or churn, and what does that mean now from your own wallet or prepaid instrument application to the RBI and the outlook for that? That's my last question. Thank you.
I think, no impact. We visited with earning release on the system. We remain committed.
Sure. Wallet license?
No, we remain committed.
Okay. Sure. Thank you, Vijay, Madhur. All the best, and thanks for taking my questions.
Thanks, Manish. The next question will be from Mr. Sachin Salgaonkar from BofA, followed by Pranav Kshatriya from Emkay. Sachin, you may please go ahead.
Thanks, Anandita. Good morning management. First question, generally a follow-up. You know, when we look about growth accelerating in FY 2027, there are multiple other small businesses which are yet to scale up. Wealth management, brokerage, you know, insurance, even on the personal loan basis. Any color in terms of, you know, I mean, should we see a good amount of acceleration coming from these businesses scaling up? It's the existing merchant loan business, Soundbox, as well as the core payments business which will help accelerate the growth? In a very simplistic manner, you know, I mean, should the core business show acceleration of growth or, you know, should we see a combination of both actually?
First of all, the business model is straight and simple, that we acquire customers using payments and we cross-sell financial services. We've done good in credit. We definitely are right now focused on wealth or securities brokerage, whichever the line item that we want to call, combine into one wealth item. It is critical for us to make it a third leg of growth. It is. It may not. I've said it in last earning call that we want to see ourselves in top five sooner than later, and that remains a focus area individually for me also. In other words, I'm saying that payment has to scale because that is a TAM, so there is no alternate to that. We will keep investing. If you notice, we have very clearly articulated the amount of invested in expansion, amount in creation.
Our cost optimization is rather about creation of the product and platform of payments because the cost is much lesser than that and continue to re-reduce. The attention is more about expanding that platform to a dramatic large enough optimum TAM. A dramatic large from today, optimum because we don't want to acquire everyone. That is the word I'm using. It is an obligation, and right now we are so happy seeing the monetization cycles showing up that that is the primary opportunity of it. In fact, over the period, Paytm could be looked at as a payment platform that monetized in financial services so well.
Sachin, message you should take away is it is more or less across the board. Our large established businesses, we see huge opportunity ahead. We love our merchants online and offline. Last year, online had a headwind that we did not have permission to onboard new customers for about half a year. That's lifted. We're seeing good traction there. Offline, obviously, there's huge market opportunities still ahead. I know this is a very popularly asked question, which is, "Hey, you have added X number of merchants. Do you still see growth ahead?" Absolutely. We are seeing market expansion and we are seeing market share growth. That's going really well. That's one bucket of large established overall profitable businesses. The second bucket is, businesses which have scaled but had some headwinds in the last couple of years.
Advertising because of our MTU went through a revamp . Personal loans had a headwind because of credit cycle. A lot of that is turning into tailwinds from slightly lower base. The third one, like Vijay said, is where is the third pillar? The third pillar we think is in wealth. There, I would characterize that as a slightly different business where we are younger and has low market share, but great opportunity to increase market share and these are proven businesses. That's why, when sort of retail broking , if you will, gets filtered to the top. Those are sort of the three legs of revenue growth, and we're feel quite excited about each one of those three buckets.
Great. Thanks for the detailed answer. My next question is, a statement you mentioned in your shareholders letter that, you're looking to keep some dry powder for selective inorganic action. On a really big picture basis, you know, how could we think about this? Any specific areas in the current business you are looking to focus? Is it more on international alliance or is it any kind of a new opportunity which is going to open given the fact that, AI could open up doors for new businesses as well?
Yeah. Any new investment only in AI.
Sorry.
Any new investment only in AI.
Only in AI. Okay. You know, I mean, Vijay, when we talk about AI, is it something which is going to help the existing businesses or it could be a completely new line of business actually?
It's primarily the same customers, same merchants, primarily making their life better. Like I told, in last Manish's question that we believe there will be significant amount of opportunity for us to create AI business and so on.
Got it. Last, just a bit of follow-up, on this RBI thing where, what kind of further permissions licenses are we expecting from RBI? One is wallet, which is largely known, but beyond wallet, is there anything which is pending per se from a RBI point of view where you guys have applied?
No.
Okay. Vijay, any timeline when we could expect the wallet license?
There's others who'd head down and execute than me. There is so much on the plate and table that I would say that ambiguity is behind us.
Okay, great. Thanks and all the best.
Thanks, Sachin. We'll take the next question from Pranav Kshatriya from Emkay, followed by Vijit Jain from Citi. Pranav, please go ahead.
My first question is, you know, regarding the higher promotional and cashback incentives. We've seen this expense going up quarter on quarter. You know, correspondingly, we've not really seen any jump in the marketing services. I understand this is a seasonally lean period for marketing services, but there is no increase in the MTU as well. How should we see this, you know, trending and what is the, you know, timeline for it to give outcome?
I think it is the marketing services where you sort of expect, let's say our commerce line items to do the good job, but it is also going in expansion and cleanup of our existing customers tying towards other services beyond just marketing services. For example, like there is digital G`old on our platform, there is element of deal discount gift vouchers. We believe that centering the mode of customers and locking in on our platform is the first priority, which is what the payments core job is. We do acquire customers. I mean, Pranav, it's a two choice to put that we can continue to acquire an incremental costly, incremental lower cost customer who's not in the ecosystem.
The cost of that is that you will not have large users because the new incremental customer left in the ecosystem is a very low, transacting or low value customer, if you will. We are trying to acquire high quality, good quality customers. Incremental spend will consistently go up, but it will not go up in the ratio of what you could just recklessly spend. We have been measured, and we remain measured in spending, but at the same point of time, we are conscious about which kind of and quality of customer are we getting and what purpose the customer is coming. There, these things go through quarter- on- quarter measurements and recalibrations.
At the same point of time, I'm committing this once again, that we will continue to spend it not more than what the ratios have been right now, like we have always said it. It is not an incremental exercise spend at all, first of all. It is within the guidance we have given. At the same point of time, the usage of this money will continue to calibrate towards which service is what we continue to do it.
Just a couple of practical things to just contextualize. One is, you have to look at it sort of like marketing expenses and cashback together, because some of those are decisions that the teams make in terms of where they want to spend their marketing dollars. The second is, while the MTU number may not reflect all the impact of this spend, but if you look at our engagement, that has gone up dramatically. The market share growth that you're seeing is far exceeding, if you will, MTU growth to underline the point that Vijay mentioned about, quality of customers and engagement of customers. Take a step back.
If we were to break our business into consumer side and merchant side, we have had the best quarter from a profitability standpoint on the consumer side in the last eight quarters. It is flowing down to the bottom line, these addition area, despite these additional spends.
Okay, fantastic. My second question is regarding indirect cost. You know, typically Q1 will have, you know, higher employee costs on account of appraisals and salary hikes. How should it trend from here on? Should we expect that to remain in current, you know, INR 1,150 thereabouts, or it can be significantly higher than that?
There are quarter- on- quarter changes, particularly including the impact of appraisals. If we look outwards towards the next year. We do think that, like we have said, this will grow significantly lower than revenue and contribution profit growth and continued operating leverage as a result of that. The second point I would make is that we still see efficiencies in various parts of the organization due to use of AI.
Excellent. From my side, I'll get back into you. Thank you so much.
Thanks, Pranav.
Thank you.
Thank you.
The next question is from Vijit Jain from Citi, followed by Jayant Kharote from Axis Capital.
Yeah, hi. Thank you. Can you hear me?
Yep.
Yeah. Hi. Thank you. my first question is, you know,
Oh, he's gonna be joining us now as a panelist. Maybe that's someone else.
Yeah.
Hi. Can you hear me now?
Yes.
Sorry, I think. My first question is on net payment margins. Good to see, you know, 9 basis points overall. You've said that it's remained above 4 basis points despite the PIDF subsidies and so on going away. Looking ahead, you know, what would you call the major drivers for it continuing to go up? I know you have various streams, merchant fees, instant settlement. I don't know if you're deploying working capital towards instant settlement. Of course, you have UPI credit and EMI. I just wanted to get your sense on all three or four different drivers where you still think there is decent upside and how do you get those upsides? Are these going to be more push driven or just organically will happen?
I think there's a whole bunch of smaller factors, but the two major factors, especially when you think about payment processing margin, which is what we have said is higher than 4 basis points. The two major factors are our product improvements, giving us the luxury of having a pricing discipline. We have talked about pricing discipline in the presentation, but the underlying piece is that our product keeps getting better and better, and as a result, customers, merchants in this case are seeing more value in our product. And the second is just a shift in the industry, which is credit instruments, being on UPI rails, and growing at much faster pace than overall GMV.
We've talked about credit card on UPI before, obviously Paytm Postpaid is starting to be a contributor as well. Still relatively smaller compared to a couple of years ago, but becoming a contributor as well. If you can have a small even a small percentage which is giving you 20, 30, 40 basis points of margin, then obviously it does change the overall mix significantly.
Got it. Madhur, safe to say there are plenty of upside drivers to those core net payment margins, right? From what is right now greater than focus.
Yes.
Got it. Thank you. Specifically on some of these, you know, a lot of your merchants are obviously in the, you know, long tail mid-market side of things. I would imagine, you know, things like, I think, settling the balances faster and so on and so forth, is potentially more useful thing to those kinds of merchants than to larger merchants. Is that a product that has a lot of success and adoption from merchants? Just want to get a sense of, you know, whether you see more avenues for where you could deploy your capital, it gets you some fees and is, you know, useful to your merchants as well.
We do believe settlement as a product, it is a good product. It is a necessary product. We do it.
Got it. The next question I had was on Paytm Money. In general, you know, are there any product investments that you still need to do within Paytm Money to kind of, you know, make the proposition more compelling to heavy users, traders versus, say, investors? I'm just trying to get a sense of whether there are gaps there.
Short answer, dramatic mode. I mean, obviously the AI is changing everything, my friend. I mean, the agents will show up that will do trading. Agents will take care of your portfolio reinvestment. Agents will show up that trading strategy of yours will be reviewed. Agents will create optional trade for you. Agent will create scalper. I mean, there is I would rather say I'm lucky that we did not dump a lot of money earlier because in the AI world everything resets. We see it as an opportunity of bringing some product that is materially better for from now to 2030. I mean, the point is-
Got it.
What got created in 2020 is not going to work in 2023. That I can write it. Anybody who's not investing is an opportunity for us that person's customers.
Got it.
Vijay, just sticking to that point a little bit more, what you're talking about is consumer-facing experience of how you trade. Is there anything on the back end also that you need to invest in to be able to serve?
Isn't that mean consumer-facing is a lot of consumer-facing is going to get easier because you will not tap, tap, tap.
I see.
Everything is a back-end investment. I mean, everything.
Right.
is a core investment machine. Anything that shows up in the front, it is only as good as it is in the back.
Understood.
So-
My last Understood, Vijay. My last question, you know, any comments on how Paytm Checkin' has done since you've launched it? I think it's been a few quarters.
This is... So Vijit this is our dip test.
That how Indian consumers are okay for a interface that is chat interface, agent interface, completely agentic.
It's our perfect experiment to look at it, and we picked up a different brand name so that people don't perceive that, okay, this is what popped out or something.
Completely agentic approach towards consumer interfaces. I see agentic interface as rejuvenated new opportunity for Paytm to gain consumer shares in number of categories. This is our expectation.
Good to hear. Thank you so much.
With just one side note.
Yeah.
You will be shocked. The funnel conversion on agentic when a customer starts, it typically is 2% or 3% in a funnel that starts where the commitment is the customer can be browsed, but funnel converts maybe 100 people if they're purchasing, it goes 2%, 3% in a good scenario, good product company would do that. Mm-hmm. It's seven or eight times more than that, my friend. Seven or eight times more. It is 700% better funnel because of agentic. I mean, boom.
People go closer to transaction.
No, they complete more seven times more people complete the funnel in agentic workflow than a tap workflow.
Oh, okay. Good to hear. Yeah. Thank you so much. Best of luck for FY 2027.
Yeah. Thank you. Thank you.
Thank you. We'll take the next question from Jayant from Axis Capital, followed by Kaushik Agrawal.
See.
Jayant, you may go ahead.
I think, it forces people if I enter. I got it.
Hi, Jayant.
No, no. I just made him a panelist. You can get someone else. I don't.
Am I audible? Hello?
Yeah. Yeah, you are.
I don't know how I got promoted to panelist. Yeah, congratulations for great performance on financials, services, guys. First question was on the payments piece. I see you have done a very strong growth over there. If I see this quarter versus last year's fourth quarter, both your GMV is up 27% and the margins are moving from less more than 3 to more than 4 basis points. That actually throws up a very high growth number on the payment processing margins, more like 50%, 60%. Is this a real number or are we missing something? I mean, that is quite high a growth in payment processing.
Jayant, just to be clear, guidance earlier was greater than 3 basis points, which is not to say that we were exactly at 3 basis points, but the math that you're doing while adjusted for that number is correct. That our payment processing margin is operational.
Great. Unfortunately, what that implies is subscription revenue has not grown at all Y-o-Y. This is despite us adding 27% linked devices, which is 22% on our base. Is that because a lot of these would have gone for PIDF linked devices? Of course, how do we think about this without any price hike? It means the device addition is not fully translating to revenue growth.
It is the case that PIDF has an impact. It is also the case that adjusted for, without adjusting for that, the device subscription per device overall is slightly lower. We do see this as a very good funnel to merchant lending. What we look at internally is payback periods at a very, very detailed cohort level, and those payback periods are improving significantly. Part of that is also because we are getting more efficient at acquiring customers and our CapEx per device as well as well as, retention of merchants.
Does that mean, because we have two strong pillars in the net payment revenues, that essentially looking ahead, it's going to be largely net payment processing margin that's going to do the heavy lifting on this revenue line item?
It is the case that payment processing margin is growing faster and partly because payment processing margin is growing faster, but combined with the fact that our lending penetration is going up, we are okay to make a little bit less money on device subscription per merchant.
Great. Just one follow-up on that only, that the credit card on UPI growth, I mean, we've seen the whole industry credit card growth is just flat cratered right now, to single digit. Generally what we've been observing is credit card on RuPay UPI moves 2x of that number roughly. That has been like 30% when industry was at 15%. That industry is down to 7%-10%. Are you observing a similar moderation from that 30% or to 20%-25%? Then, of course, the worry is our GMV growth then moves in sync with credit card on RuPay UPI, and then how does the margin expansion happen?
What you're saying logically should have some impact, but I don't think we are seeing anything noticeable there. I mean, I would point out that credit card on UPI is a very small, very, very small percentage of overall credit card.
One thing we can tell you that our credit card on UPI percentage is more than the standard bank account payment percentage. That tells that we have a higher quality customers on our app.
Definitely that has been giving a very good margin, improvement.
Yeah. Our margin improvement is rather about because we have a high quality, I mean, it has been ever since, and all the events have still made the customer retain, means they are long-run old customers, and that means that they are high quality, which extends towards credit worthiness, which extends towards their credit card usage. Our credit card usage is more than the market share and order of magnitude. Once again, I mean, that is why our GMV growth has been higher because if you notice, the same number of MTU used didn't grow, but usage grew because the product became better, the product became better for the customers who are better quality customers. We talk about product quality, customer quality, not just the volume.
Great. Lastly, on costs and margin, we are guiding for more than 22% growth. If I'm correct, now contribution margins we should expect between 55%-60%, but maybe more 55% to rather than 60%, what was happening because of the PIDF impact. I mean, then indirect costs I'm seeing has after a great performance for eight quarters, is rightfully so you're investing in growth is picking up. Does that mean that from here on the journey is going to be incremental rather than what we saw last year? If you see Q4 versus Q3, Adjusted EBITDA growth is a decent INR 30 crore, but does it mean we should look at something more linear now than the exponential numbers that we saw through last year?
We should be talking about EBITDA margin.
Yes.
like you said in my team. We do expect significant operating leverage going forward because logically the math that you were doing, if we have a revenue growth acceleration, which we are confident of, and indirect expenses going significantly lower, then just the math is just embedded in that you would see significant operating leverage going forward.
I was just talking about the journey, Madhur. Is it going to be up-fronted or should we now think of this to be slightly more back-ended?
I don't wanna get into quarter- on- quarter, but if we are sitting here a year from now, we're confident that we'll look back and say there was significant operating leverage and EBITDA margin expansion as a result.
Great. Thanks and congratulations once again for a great set of results.
Thank you.
Thanks, Jayant. We'll take the next question from Kaushik Agrawal, followed by Rahul Jain from Dolat Capital. Kaushik, you go ahead, please. Kaushik, you are on mute. If you can unmute your line.
Rahul, you can, Kaushik. Rahul, go ahead. You can ask us the question.
Yeah.
Yeah. Hi. Thanks for the opportunity. Firstly, we have highlighted about the investment we intend to do on the cashback side. Can you highlight some of the consumer use cases? Also from a run rate point of view, do we see a meaningful increase from the exit of INR 1 billion odd we invested in this quarter?
Sorry, can you just go through the first question again? Only about cashback.
Yeah, the cashback investment that we want to do, are there any specific areas where we are trying to? Because we highlighted there's a high margin segment that we would like to invest.
Vijay, I think sort of already touched upon this. Our Digital Gold is one of those categories, which is covered in financial services, just as a housekeeping point. There are several use cases on marketing services, particularly travel, where we see good ROI on investments. There's also always a chunk of investment that goes into ensuring that you're building more engagement and more retention of customers.
Surely. On the sales headcount side, do we see some more optimization to happen since the sunset on the PIDF?
I think it's a combination of sales optimization as well as subscription revenue for device optimization. We had said last quarter, in end of January that we'll be able to significantly offset it over the next few quarters and our Q4, and I think it was in response to a question, was that we would be able to offset 30%-40%. I'm pleased to report that we did achieve that, and we are confident that over time we'll be able to significantly achieve a full, near full offset. Some of that will show up in sales cost impact.
Sure. Just lastly, of course, people have tried asking this, on the AI investments. Would this could be also in line of creating a captive data center for more data inferencing, or this would be purely from an M&A point of view?
No, Rahul, there is nothing like we don't have a CapEx plan on AI. I mean, there is enough amount of CapEx U.S. big guys are doing, and we don't think that we have a game in that yet. We do believe there is an opportunity for us to invest in AI equal to like saying, let's say we are using agents for our customers. We can rent somewhere a data center. We can rent, let's say, NVIDIA's and then run our own model on top of it, that kind of investment. Investment is attention and effort, not just capital. We don't have a material capital investment plan right now on the table or in plan.
Thank you. Those were my questions.
Thank you.
Thank you. We will take the next question from Harshit from Premji, followed by Sachin Dixit from JM Financial. Harshit, you may please unmute your line and go ahead.
Hi, Vijay. Hi, Madhur. The question was more to get some sense of our merchant ecosystem base. Vijay, I think the point was that probably we are lending to a segment where they are okay to borrow at that 25%-30% rough IRR for them. Now, probably, Vijay, I know that you guys don't give the disbursement number.
Some sort of back calculations, et cetera, whatever that number is, but that number is even if I take an INR 40,000-INR 50,000 crore of annual run rate, we would be a large part of that market itself, the addressable market. Just want to get a sense that our payment service or financial distribution revenue growth from here on, will it be driven by the consumer loan product incrementally? In case of merchants, do you envisage a situation that probably it's the lower-yielding segment where we'll have to move to expand to maintain this growth run rate? Broadly, some color on the merchant profile and probably your market share within whatever you guys think as the addressable market share market for this range of merchant lending.
The best part is that we don't own the book, so everybody who wants to serve this customer is our potential partner, including banks or anybody else, if you want to acknowledge that. We don't have a market share problem because we own certain book versus somebody else owns certain book. They go to the current lenders who are interested in lender. We become the channel. Now, the most logical captive customer of the customer are merchants, where we are capturing everyday payment flow is most logical. Anybody else can also do it, but most logical is us. On our customer base, we are penetrated less than 5% or 5.5% right now.
On merchant base, about 7%.
About 7%, and that too based on subscription merchant denominator.
Remember.
Got it.
The person who has a selection bias of paying a subscription, we are talking 7% penetration, or obviously there is a large number of merchant base otherwise beyond that.
Got it. My point on competition when I asked was more from the distribution itself. For example, many other players will also have access to that customer over time, if not today. The engagement, everyone will try to increase their engagement. Competition as a distribution partner is what I was trying to understand rather than from the lender point of view.
The merchant who is our merchant, if that merchant defects from us as a payment merchant, we don't think that we would be in a superior state, or somebody who does not have that merchant will have a superior state of distributing. It's a counter share kind of question, as you know, Harshit. So there are two kind of merchants, exclusive to us or non-exclusive to us, only that. In a non-exclusive case, if we are getting a lesser data, we anyways are not going to help him get loan unless we have a larger enough payment flow data that we are able to partner with our lender. Lender believes that, "Yes, this is good enough.
I would like to extend the loan. We don't, I mean, we don't have a, again, much more to do but to retain our payment merchants and do a good multiple of distributing and collecting.
Got it.
If I may just expand the question a little bit just to the building blocks of this. One is we have the core product of merchant loans, which you described, is to smaller merchants, smaller ticket size. We've been doing it for six years really well. There, as Vijay said, we have about 7% penetration, so you should understand that. The second is a TAM expansion story, which I think you touched upon a little bit, Harshit, on the merchant loan product, that we do have types of merchants who may not find our current products or the products that we had in FY 2026 suitable.
Those could be larger ticket size loans, for example, where, like Vijay said, because we partner with lenders and if lenders want to distribute such loans to them, then we are a logical partner for that. That's the merchant loan story. Slightly more broadly, we expect things like wealth and personal loans to be a much bigger contributor next year than before. What we're excited about in this financial services line is that there are multiple drivers of growth next year which are quite visible.
Got it. Fair point. Perfect. Done. Thanks a lot.
That's right.
Thank you.
Thanks. We will take the next question from Piran Engineer from CLSA, followed by Sachin Dixit, JM Financial, if that's okay. Piran, you can go ahead.
Yeah. Hi. Hi. Good morning, guys. Congrats on the quarter. Just firstly on the retail broking thing you touched upon using AI to sort of grow that business. Firstly, are we targeting customers who don't have a broking account or are we going after everyone? I'm assuming that out of your 7, 8 crore active customers, a lot would already be broking with one of the incumbent platforms, right? How are we thinking about that first?
Look, we add on both sides. We add customers from both sides. We net some winner on, from other platforms. We get new customers.
Vijay.
New customers mostly, new are mostly towards mutual funds and SIP creations.
Okay.
Typically it may be called churn from other platform or customers are also joining multiple accounts as well.
What's our value proposition for the core F&O kind of traders versus say a Zerodha or a Groww platform? See, also I get a sense, we analysts are not allowed to trade, but most traders want to be in charge of their trading, right? They probably don't want an AI agent to recommend, et cetera. I'm not too sure how that strategy will help the core F&O traders.
Yeah. When we launch the product, you'll get to see it. I mean, there's nothing more about it. I mean, it's nothing better to say than when it gets launched. There's no secret spice I'm using here. It's very visible to everybody. I see it as writing on the wall. I see it as everybody knows what impact of AI and addition of AI will do to the product for any segment that you want. It's as normal as that.
We will not indulge in price discounting, et cetera, right? To gain share there.
Always remember, Piran, our customer equation is payments. This is our monetization lens.
Which means that we are okay giving it slightly cheaper. Like if Zerodha is doing 20 bucks a trade.
I don't think this is a price fight, especially at I mean, you're going now probably the time when we are competing with anybody else for the price. You see our pricing. We don't think the price is a value. We believe product is a value. Pricing is like commodity any which way for anybody to price for.
Okay, fair.
Those who discount their product, they feel that is the value of their product.
Fair. Okay. Just secondly, a data-keeping question. This quarter and last quarter, what is the proportion of DLG in our merchant loan disbursements?
Proportion of DLG is broadly flat, maybe slightly higher. As a proportion of loans that go through DL.
Yes.
with DLG is, probably slightly higher. The amount of DLG is flat, flattish.
Should I take it at 20%, 25% or a bit higher than that?
I don't think we've guided that before, and it's not a metric that honestly we try to sort of keep within certain guardrails or target a certain number, so I'd rather not get into that.
Got it. Okay. Just lastly, can you give us some color on online versus offline growth on the merchant processing side?
Online, I'd say we've started to grow the GMV. We've started to farm the account better, and we obviously started to add new customers. I would rather say that online has a bigger opportunity now considering there are B2C brands, there are offline people going online than we envisaged a year back. That I can say. We will address and are addressing it accordingly in that approach.
Vijay, what proportion of our merchant GMV would it be now? I understand it's small, like single digits small or?
No, it I mean, I'm sorry. I'll let Madhur answer that one.
We are a very significant player in online merchants.
[inaudible] .
fact that until last year, we were not really adding new customers for.
Yeah.
greater than three years, right? We're a very significant player there. It is very meaningful double digits GMV, so it's not single digits and all, so I won't dispel that.
Okay.
We don't really look at it as a percent of total because they have independent growth drivers. There's huge now hunting opportunities as well as farming opportunities.
in online merchants while maintaining pricing discipline. In the offline merchant base, we're a very large enterprise business, as we have talked about before.
Which is independently profitable. We have the SMB business, as we call it, which has investments because that is very sales team heavy. It also is the target market primarily for our merchant loan business. These three things have sort of independent growth drivers and run by very, very strong management teams in each case, and they march ahead. There is a common tissue that there are certain merchants who benefit from omni-channel solutions.
Yeah.
That sort of overrides and that's just a collaboration between the teams, but they're largely sort of independent operations.
Got it. Okay. That's it from my end. Thanks and all the best.
Thank you.
Thank you. We'll take the next question from Sachin Dixit from JM Financial, followed by the last question of the day from Anusha Kastur from UBS. Sachin, you may go ahead.
Hi, Nandita. Hi, Vijay and on the question side, my first question was on basically monetization of some of the AI products. I do understand it's still early days, but can you talk about anything that we are seeing on the, especially on the Soundbox with AI capabilities part or any other products where you are actually seeing some monetization benefits also creeping up already?
Yeah, yeah. Classically marketing, which we used to give them tools, now we are asking them to do it through agents. We believe that merchants will be able to do it easier because agent will do the necessary job of workflow taking care versus let's say we are giving certain marketing products. That is the kind of approach that we are taking. The product line items still will remain the same, and it will become better as your penetration and usage because we are using AI or allowing merchant to use or customers to use AI.
Sorry, Vijay, if I understand it right, monetization is usage-linked , is it?
Monetization is, let's say, I'm saying the customer that you can use us for acquiring or retaining customers. The person may be, we recharge subscription plus usage or only the usage so that the person does more usage. Approach will be, somebody wants to reach out, make an outreach to their customers. We can give it on a, let's say, you can run an ad on Paytm app. You can run communications through different communication channels to the customers, and then you can get the customer acquisition sorted out through our platforms. These platforms, monetizations, eventually what you're doing it is a tool to achieve more customers acquired, more customers retained and repeating or stopping the churn. Now, the customers, our customers can pay for, certain per consumer basis, platform subscription basis, per usage basis.
We are in the midst of these kind of discussions that which of these line item work for us or work for our customers.
Understood. Understood. Thanks for that. On the second question side, sort of a top-up on Harshit's question as well. Is it possible for you to break down the growth drivers of merchant lending, right? I do understand it's growing almost like high 30s, if not 40s. Going ahead, can we break it down between, like, maybe the Soundbox devices grow at this rate, penetration goes up by this rate and ticket price or any such thing, grow at this rate?
Yes.
-evident for people like us.
Good modeling question.
Yeah.
I think, I have the data, I can share it. Historically, what we have seen is three primary drivers of growth. One is the expansion of the base, the second is the penetration rate, and the third is the increase in ticket size. Each one of these has been broadly similar. Roughly call it 15% give or take on each one of these drivers. You know, we can dig into this if you, if you would like to. Going forward, for our core business, we think this will probably remain the same.
But as at an overall level, because as you go for TAM expansion, you may see that ticket sizes might, on a blended basis, be slightly higher, especially if we are more successful in the slightly higher ticket size loans and so on. If you look at that separately, then the core business remains intact with those drivers. There's an opportunity to sort of expand TAM beyond that.
Where do we see the penetration level reaching, like the 7%-ish that you mentioned, in terms of merchant lending as a percentage of subscription devices?
Yeah. Yeah. I mean, it has broadly been going up at 1% a year.
Okay.
If you think about a year ago, we were broadly at 6%, now we are closer to 7%, that's about a 15% increase that I was talking about earlier.
The core is about the more engaged merchant on the platform, the better the lending partners have a trust and confidence that this person's ability to repay back.
Right.
Just to add to that, and this is sort of a logical follow-up to this, is that our engagement with merchants is going up very meaningfully, and that shows up in our GMV data, et cetera, as you can see. That could mean that the penetration rates start to look a little bit better, the ticket sizes start to look a little bit better and sort of break out a bit. Those things do happen and businesses obviously evolve as a result. It is a very interesting I think about three quarters ago we had sort of called out, and we can share that earnings release with you separately, exactly what we have seen over the last four years.
Understood. Understood. I mean, basically the math that I was trying to do that we effectively can be talking about almost a 40% growth if we look at these three drivers, you know, is our opinion. Understood. Just one final question and more like a quick response. There has obviously been chatter post that Paytm Payments Bank license thing happening, that Paytm might go for a new license, maybe an NBFC license as well. Any comments, any thoughts on that? That's my last question. Thank you.
We do have a comment on that, and it is in our Q&A at the back of the earnings release. Just to summarize for this audience, one is, there are two broad thoughts on that. The short answer is we're not super excited about going for an NBFC license. The rationale for that is broadly two things. One is we really like our model where we stick to what we are uniquely good at, which is distribution, building great technology so that customer merchants can convert better, insights on these merchants as well as collection abilities. Our partners, and they are very, very blue-chip partners, are very good at managing capital, managing risk, managing cyclicality, and so on.
We do think this is a win-win partnership, and Paytm does try to be a win-win partner for whoever we partner with across the board here, obviously we're talking about lending. The second point is, to your earlier question, we see the opportunity as absolutely massive. We have very large payments market. That market is growing, our market share is growing. That combined with low penetration means that the opportunity is in the short to medium term already is very large. We do think that logically that loan book should sit on multiple balance sheets, not a single balance sheet, not neither ours nor a single partner's. Aggregating many more balance sheets we think helps us achieve our medium-term goals a lot better than trying to anchor it on one balance sheet.
Yeah. Thanks. Thanks for that, Madhur, and all the best.
Yeah.
I have Kaushik Agarwal asking a question in the chat window, and I'm answering till the time period whom are you getting.
We have the last question from Madhu.
Hello. You could unmute yourself and so on, but I am just answering what is written here.
Yes.
That can you give color around the asset quality and lending distribution business and so on? Sir, we are absolutely not in the asset quality business because we do not own the risk or the credit that is disbursed on any book. If ever our commitment is towards FLDG, this is completely the decision and ownership of the book that sits with lenders. This question does not sit with us. This is our role is, it's like saying, we are the retailers, not the manufacturers, if you will, of this. Second question you are asking, sir, is that what is the non-MDR -linked payment instrument or GMV? It's very easy. RBI has different kind of data. Our mix of India-linked instruments is growing. That is why net payment margin is growing.
On question number three, it is the case that we have CapEx, but next year we expect EBITDA to be significantly higher than CapEx. Your observation about last year is correct. INR 500 crore of EBITDA, but we have CapEx. Should I take Sandhya's question as well?
Well, yeah, that one's here.
Sandhya, on the merchant side, we have three or four drivers of monetization. One, like you mentioned, is subscription. The second is MDR on MDR-bearing instruments. If they're accepting credit cards or credit card on UPI or Paytm Postpaid, all of those are MDR-bearing instruments. The third, as you pointed out, is merchant loans. Those are the three big drivers for monetization. It is the case that not every merchant may be paying us at least one of the three, but vast majority of merchants do. At a cohort level, the payback period is always within acceptable months.
Yeah. Thank you for asking these questions in the open chat. As you know, we can take those also and when we have Alok here.
Thank you. Alok, you may
Yeah.
unmute your line, please go ahead.
Sure. Yeah, hi, morning, Vijay, morning, Madhur. I just have one question. If you could provide some color on affordability. In your earnings release, you have mentioned that it has supported margin. Just in terms of whatever you are comfortable sharing in terms of, let's say, GMV, what percent of our machines have affordability enabled? What is the outlook here, value proposition, and so on? Thank you.
I think the one thing I can say is more than half of our machines are enabled and for disbursing EMIs. I don't think that we have GMV numbers
Okay.
by the instrument. You can be very sure this is in enterprise segments, in long-tail segments, both alike. It is liked because they want to make affordability as a feature for the customers on the shop, and we continue to aggregate everybody. Aggregation, as you know, is our primary role here. We continue to aggregate from as many people.
We have very strong partnerships with both brands and banks are the other piece of the ecosystem. There's merchants and there's banks and brands, and then there's obviously the consumer. The fifth and greater than half number that Vijay gave for enablement on card machines, that is very significant because not 100% of merchants need EMI necessarily, right? It is limited to certain categories of merchants, generally those who have higher ticket size transactions. We're making huge progress in this. We are gaining share because of our focus on this business and obviously we have talked about the impact on processing margins.
Okay. Fair to say, Madhur, that this will be largely in electronics, the machine in terms of?
No. Electronics is an anchor category, but there are many other categories.
Yes.
Healthcare is a category.
CDIT, normally on everything else. Beyond electronics, furniture.
Furniture, fashion, even beauty products.
I think INR 5,000 and plus ticket size helps everywhere.
Even something like quick commerce, which you may not expect, does actually have some percentage EMI- based transaction. I'm giving you the sort of contrasting example, which might not be super obvious. It wasn't to me until I saw the data of what, you know, where is our EMI volume coming from.
Okay, got it. Thanks a lot.
Thank you.
Thank you. I'll take question from Arjun Juneja who said that any interest in building paid loyalty program on consumer merchant site for drive digital lock-in. We have gold coin-based product, my friend, and it is not paid. It is for everybody who uses more Paytm gets more gold coins. Use Paytm for every P2P, P2M payments or every other thing. Mr. Singh says, "Congratulations on good set of numbers." Thank you, sir. Eagerly waiting for AI-led agentic capabilities tools on Paytm. Thank you.
Very best.
Thank you. With that, we come to an end of this call. A replay of this earnings call and the transcript will be made available on the company website subsequently. Thank you all for joining. You may now disconnect your lines.
Thank you.
Thank you. See you bye.