A warm welcome, everyone. Thank you for joining our earnings call for the quarter ending June 30th, 2026. As always, we are going to do this earnings call with management videos switched on. We welcome attendees to ask a question with their videos on or off as they prefer. To ask a question, you can raise your hand through your Zoom dashboard, and we will promote you as a panelist to ask your question.
Today 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, Senior Vice President, Investor Relations. In today's call, some statements made may be forward-looking in nature. Actual events may differ materially from those anticipated in such forward-looking statements. This earnings call is scheduled for 45 minutes. A replay of the call and transcript will be made available on the company's IR website subsequently. I would now like to invite our Founder and CEO, Mr. Vijay Shekhar Sharma, to share his opening remarks. Over to you, Vijay.
Hi. Thank you. Hello, everyone. It was quite a quarter. I'm very happy that as a team that we've been able to execute it so well, especially the consumer payment is something that is very close to me. We are now, as you can see, we especially talked about we are growing double the market share. We are growing double the market growth of the UPI market, which effectively means we are gaining market share. Even though the GMV market share is what is publicly talked about, the number of transaction market share, we are actually growing even further than that. More retail customers are using us on higher frequency. I personally carry a benchmark in my mind, and that benchmark that I carried is about the, let's say, January 2024 as a milestone where we sort of went through a special situation.
I can happily tell you that we just crossed the January 2024 daily transacting user, daily active user, or any other KPI that we could have kept. The past is behind us, and now we are having cash in our hand and the aggression in our mind and body. Going forward, special attention in an aggressive way, I would put the word, on consumer market acquisition or merchant acquisition very clearly there. The best part is that we've learnt our art of building a business where you can say, if I was to look at, let's say, how do you make a profitable and growing profit business? We've been able to pull that up very well. Going forward, as you would have seen that we have had our profitability increase.
I would believe that, I think we should be able to increase our profitability further, consequent quarters right away onwards, then obviously the revenue growth will mean larger profit. I'm saying it because we basically learned that you should not recklessly spend money on acquiring consumers or acquiring merchants if they are not monetizable. We've been able to grow the market share with the discipline that we want a selective customer. We just don't want market share for the heck of it. We want monetization. Consumer monetization is something that we're very proud of. Like we talked about it last time, we are looking at monetization using wealth beyond our credit and other financial services that we talk about any which way. If you were to look at a year forward, I think wealth will become our equity brokerage and mutual fund distribution.
Although we are not wealth-wealth in a traditional industry calls wealth. What we are talking about wealth as an overall internal bucket. We put equity brokerage, mutual fund. This is one area that is very bright spot. I'm putting a lot of my attention there. Payment sort of a product market fit, consumer and merchant both together, more aggressive growth. Credit, as you are aware, we're doing pretty good. I think there is no aggressive instance required rather there because it is running perfectly well. It'll go towards wealth, which is where the aggression is required. Beyond that comes the most important and consequential technology of our time, and that is AI. I am currently working on business and revenue line items that are non-payment, non-financial services.
I fundamentally believe that moving ahead of the optimization journey, we will start to see our revenue monetization journey of AI. I'm very extraordinarily happy that some of our products have started showing up few lakhs of revenue. It is important to know that we are going to, let say, a couple of quarters later, I wish less than a year, I'm able to say this line item. Which will anyways go into Commerce Cloud, the traditional erstwhile marketing cloud business that we used to have it in that line item. That is these two line items that I'm personally focused on.
Thank you so much for all the support and guidance that you always give us in the journey and days. I'm very happy to announce, and you saw this, that we are now joined by three more new independent board directors. New attention towards technology, business, finance, globalization, everything is out there. With this, we can start with the questions.
Thanks, Vijay. We will start our Q&A now. The first question is from Mr. Manish Adukia from Goldman Sachs, followed by Mr. Sachin Salgaonkar from Bank of America. Manish, you may please go ahead.
Thank you. Hi, Vijay, Madhur. It's good to see you, and a fantastic set of results. Congratulations on that. I wanted to delve a little bit deeper on the shareholder letter and some of the numbers and the results. Madhur, maybe the first question is to you. On EBITDA margin, when you say that now you have higher visibility on the 15%- 20% margin number in the next two to three years. One, are you saying that you can get to that number sooner than what you had thought? Two, when you say higher margin over the long term? Is there a theoretical number you have in mind, and how should we think about what that higher margin in the long term may look like? That's my first question, please.
Yeah, I think at the core of it, Manish, the reason why we're saying what we're saying is that the revenue growth acceleration and the fact that indirect expenses are growing significantly slower than revenue growth. That's what's giving us confidence to make both the statements that you pointed out, which is that we should be able to have higher confidence of getting to that number and perhaps getting to it sooner.
We do think that AI structurally not only accelerates operating leverage, it also expands the opportunity for higher margins over time, because you're just able to do more with less. We have been able to deploy a huge number of applications and agents within our business, which are helping us become very efficient, and we have talked about that in one of the pages in the deck. Yes, we are saying that both of those things are starting to come true.
Sure. Sorry, my question, Madhur, also was, in the long term, when you say higher margins, do you have a theoretical number in mind as to where you can get to?
Yeah. We aren't giving a number for that right now because as you know, it's a trade-off between just pursuing more growth and building an even larger business, which we absolutely think we have an opportunity to do in the areas that Vijay mentioned. That will require investments. Yeah, structural margins for our business are significantly higher than the 15%-20%, which we have said we would achieve in the near term.
Yeah.
Very clear.
Manish, the thing is that we probably announced 8%.
Yes.
EBITDA margin this quarter. This is a ramp-up from here. It has to grow forward. I know you are seeking a terminal number, and Madhur is saying that it is more than 15%, 16%. The direction is that we are talking about higher profitability and higher profit both together.
Very clear.
While we are aggressive on these numbers.
No, very clear. Maybe a follow-on on that one is when we think about growth, which you're saying, Madhur, has been accelerating and it's visible in numbers as well with Postpaid ramping up now. You've started onboarding online merchants from late last year. Consumer payments business is seeing market share gains, right? With all of these together, is there any hurdles or downside risk to revenue? For example, this quarter, if you grew 28% Y-o-Y, are there any downward pressures on revenues at all in the foreseeable future? I'm not asking for a number as to what you can grow to, but just trying to think that, could the accelerated revenue growth momentum continue in the foreseeable future, or are there any downside risks that we should be aware of?
I think the great thing about this growth that we're seeing is that it is in nearly every business. We are seeing that in our payments to small merchants, payments to large merchants, consumer merchant payments that you mentioned. We're seeing that in financial services. We're also seeing some of the smaller businesses growing very fast. You mentioned Postpaid, which is a good example of that. We're seeing that pretty much across the board. We think having achieved this number, we should aim for even higher.
Very clear. My other question was actually on Postpaid. You've qualitatively talked about the business doing well or ramping up and FY 2028 being a year when it meaningfully adds to both revenue and EBITDA. When I look at, let’s say, your earlier peak of Postpaid, which was about INR 9,000 crore in 2023, right? Where I'm guessing a lot lower than that number now. Again, directionally, is there any reason why the company should not be able to get to that number at some time in the future? I'm not asking for a timeline, but maybe three years, four years, five years. Are there any hurdles for you to not get to that number, or directionally you are tracking to reach that number at some point in time? Your thoughts there would be helpful.
The market opportunity is massive. The customer love and product market fit for this product is excellent. It is really serving a need, there's no reason why this journey should be any different. The only thing that I would add to that is that it took us about four and a half, five years last time to get to those numbers. Currently, we are tracking roughly twice as fast, which is I'm not saying that if it took us five years last year, it will take us two and a half years. I'm not saying that. Currently we're tracking twice as fast as you would expect that we are ramping up this product. This product is ramping up with old users, new users, everyone, just really, really well.
Very clear. Just last question before I jump in the queue. Cash on the books, thank you again for the color in the shareholder letter around cash on the books, very helpful. Is it to say that from a foreseeable future perspective, there are no large uses of cash either in terms of M&A or inorganic opportunity that you may look to deploy and you're happy to have the cash build up in the books? Your thoughts or color there would be helpful.
100%. Cash is the spine and strength. I wish that we have INR 40,000 crore cash.
Very clear.
I would just add one thing that compared to when this discussion started a year ago, not only do we have the INR 13,500 crores of cash, we are now also adding a significant amount of cash. I love the fact that we are a free cash flow-generating business.
Actually, me and Madhur were discussing some days back, and we see a stress in fintech ecosystem because either you go public and then you learn the new reasons for being feels uncomfortable, or you in private round try to find out what is the reason for you to do what you want to do. I think people should get further stressed, further discounting, and that time the cash and the equity would be valuable. Today, cash is way more valuable.
Manish, while we are adding cash to our balance sheet, we are also very actively looking for within the existing perimeter of what we do, what are good ROI ideas. We have called out in the past that MTF has been a portion of our funds, very small percentage of our funds so far, which is giving us very good ROI. Within our existing business, and I love that because it is a good ROI use of our cash, and it also furthers our mission as a company in terms of serving our customers better. We're continuously looking for more opportunities within the business, mostly organic, maybe a few inorganic if there's a right opportunity at the right valuation.
Thank you. As always, great chatting with both of you. Thanks, and all the best.
Thanks.
Thanks, Manish. We will take the next question from Sachin Salgaonkar, followed by Vijit Jain from Citi. Sachin, you may please go ahead.
Thanks, Anandita. Congrats, management, for a great set of numbers. I have three questions. Let me go one by one. First question, would love to get a bit more color in terms of how the loan book is moving, what is the mix between, let's say, a merchant loan and consumer loan, and any data points you could share in terms of merchant partners and how the growth is happening. The second part of the same question is, Vijay, you did mention about equity and wealth management scaling. Any sense in terms of what is the mix today between lending and, let's say, wealth management, and how that mix could change in future?
First of all, Sachin, I'd say most of our profit is made from merchant side. Consumer side, we are driving. We have, by the way, grown now quarter-over-quarter, and the numbers which were flat or a little bit of flat and declining are significantly ramped up. We have crossed year-over-year number, like I told you, 24 for even consumer credit, if you will. The intent here is that we have done all of it mostly without requiring any FLDG, so we sort our distribution in the consumer side. At the same point in time, the most of percentage is still 80/20-wise would be towards merchant side. Quality is good, that is why it is growing.
In fact, there is much more interest from number of partners, but we remain committed to remain purely distribution company, and we don't have interest to put a book on this business at all. We have queued small finance bank and, I would say, even the large banks out there now. A couple of large banks have got activated. The partner-wise, we have more capital, and I would say more capital meaning probably four to six times more capital than we are dispersing right now. That is not a limiting factor. The percentage between wealth and this. My intention is that when I say this is my focus area, I'm trying to say what I'm trying to rejuvenate to a sizable number.
Wealth is not materially number in these two numbers, if you were to ask me, and it is sizable, but not so sizable that I think we would start showing up. The good thing is that it shows up as a subsidiary, so people are able to see the P&L of that entity. It is there. I do believe that there is an upside. MTF. We just found a secret in MTF. We got money, we got equity, we got equity capital, we got customers. The market needs it. There is a product market fit. Sachin, my intention when I say I'm focusing, I probably am trying to discover the perfect product market fit among every other person, and in wealth we seem to are reaching that milestone. After that, four more quarters, and then you will see sizing.
I just wanted to add one quick thing. You asked about number of lending partners, so I want to take this opportunity to say that that has been one of the key achievements last year in both the merchant loan and personal loan. We are now at double-digit number of partners. The new partners who have joined more recently are also ramping up very well. We have really good legs for the next several years.
Got it. Thanks both. My second question is a follow-up on to your earlier answer in terms of margins. Let's say the 8% margin goes to your 15%-20%, more like a medium-term target, what you guys have mentioned. That itself is a sort of a sharp improvement in margins. What we saw, let's say, this quarter, there was roughly nine percentage point improvement led by indirect cost on a year-over-year basis on margins. The question out here is, what are the primary drivers of margins going ahead? Is it a continued reduction in indirect cost because of the scale benefits? Is it some AI-led benefits, and if so, could you help us quantify on what the magnitude could be? Or is there a mix change which is driving those margins?
It's actually, I think all of those are similar points. At the core of it, we have a very fast-growing business with huge opportunities to expand, for example, penetration of financial services, not to mention improve unit economics of the payments business. We have a very fast-growing top line, and our indirect cost, structurally, there's operating leverage in the business, and AI makes it even better. What you would see is that indirect expenses as a percentage of revenue is going down, and the underlying reason for that is that indirect expenses is growing at a very slow pace, whereas revenues is growing at a very fast pace. I should mention that we continue to invest in areas that matter.
Yeah. The cost of people has increased year-over-year.
Yeah.
Especially the expansion of merchants, expansion of consumer business. Basically, AI is a distribution business. Let me use this, Sachin, as a metaphor of my learning of AI business. AI meaning when you have your financial services business powered by AI, the differentiation will be how many customers do you have and what you do with them. Customer quality, monetization, monetizability, these are the factors that multiply once you add the power of AI. The getting condition of, I would say, harnessing power of AI is what distribution we're sitting at. Nearly everybody could build what you build after some time, like always. Here it is that we will continuously, and I use the word aggressively, continue to invest in consumer expansion, merchant expansion, and expansion of financial services. Powered by AI stands for that our costs are dramatically optimized.
One slide that I created, and we put it in the tweet also, I think, where I said that. Our merchant distribution in a way that small business merchant acquisition is now governed by agent, where the person is identifying what our field sales executive must do. This is all made in-house. I've started to find out use cases of this going to the third-party customers also. Now you're seeing that we are flat. Practically, if you do not look at the cost of, I'd say, salespeople or marketing expense, then the organization is now flat or reducing cost quarter-on-quarter. Like I always said it. I remember that I think couple of quarters back, it used to carry how much more saving you could see. I said, this is always continuously.
There is no special quarter, special that we are trying to do in this quarter. That you would have seen the trend is continuing. What we are saying is that there is a growth of revenue. That is the magical part that we have started to show in the FY Q1 of this financial year onward. You want to see the revenue ramp up, and that is why the margin growth is talking about.
Sorry, just to add. My favorite set of metrics to pull together for this conversation, to what Vijay said, is our marketing expense is up 27% year-on-year. Our sales and service cost investment is up 27% year-on-year. Our EBITDA margin, adjusted for PIDF, went from 1%- 8%. We got a 7% EBITDA margin improvement, not despite, but in addition to the fact that we continue to make as much investment as we think makes sense.
7 percentage points.
7 percentage points.
7%.
Oh, seven percentage points.
My last question is, would love to actually understand your thoughts on UPI monetization. There are various media articles indicating that government might look to reconsider this. Certain articles are mentioning about 5-7 basis points kind of a take rate for larger merchants. If such a scenario arises, what kind of an incremental opportunity we are thinking from a Paytm point of view? Would be great if you could help us quantify or any directional data points and we could quantify the upside for Paytm.
I don't have any clue of actually the number that it could be or not, and what kind of line item it will be paid for. We were trying to model it in-house ourselves based on newspaper and various other whisper in corridor, but we just said there's no materiality to it as a discussion when you don't know what the formula is. We'll wait and watch, Sachin.
Vijay, just to reframe the question in slightly other words here. Today, if I am not wrong, you guys are looking to monetize some of a larger merchants on your platform. Would that materially change going ahead if this UPI monetization comes? In other sense, is the upside meaningful to you guys if this comes up?
Sachin, [Non-English content]
Great. Thank you, guys. Cheers.
Thanks.
Thanks, Sachin. We will take the next question from Vijit Jain from Citi, followed by Pranav Kshatriya from Emkay. Vijit, you may go ahead, please.
Vijit.
Vijit- Unmute.
Can you hear me now?
Yes.
Yeah. Congratulations, great set of numbers here. I have three questions, one each on the consumer merchant side and then on AI. Maybe on the merchant side first. In general, if you have merchants who've already upsold themselves into the financial services product or other products, so that relationship is stickier, right? There's a line in your letter which I interpreted as that in certain cases with merchants, you're reducing your subscription rentals. Shouldn't it be the other way around? Merchants who are using more than one service are already sticky. Why would you reduce their subscription ARPU?
Vijit, [Non-English content]
I see. Okay. The second question on this was, in the letter, you guys say that the net payment margins went from 8.8 basis points last year to 8.4 basis points. This is excluding the PIDF's incentives, right? In general, I see you talking about tailwinds in online payments. You have some of these other core payment margin tailwinds as well. I am just trying to understand, is it basically just these lower device rentals Y-o-Y that would have contributed to this 8.8 going to 8.4?
Yeah. We, I think, explained it in one of the questions in the back, and you are absolutely right. The payment processing margin, as we have discussed in the last few quarters, has been inching upwards gradually but consistently every quarter. The impact that you are talking about is because of c ertain plans that we run for loan merchants and highly engaged merchants. I should point out that we have mentioned as well that we have tightened our revenue recognition policy on certain businesses a little bit.
Yeah.
There is a slight impact of that, but most of it is the answer that we have given in the back of the document.
Got it. The second question I had was on the
[Non-English content]. As a business person, [Non-English content] . Madhur has literally made it, if you don't get money by the month-end, this is not a revenue recognized.
Okay. Got it.
Absolutely. Everything else is the future upside, we should get it.
Understood.
[Non-English content]
Good to hear, Vijay. Vijay, my next question is on consumer franchise. Now you have Postpaid that is scaling up. You have consumer loans, which is looking up versus last year, and MTF is doing well. You've applied for wallet license, and I'm guessing because you said that last time, wallet plus Postpaid will kick up Postpaid even further. In general, how would you say your consumer franchise in terms of monetization is looking like in FY 2027? You have a guide, I think, meaningfully better than 22% overall growth. I know merchant business, for example, is doing better than that. In terms of the consumer franchise, what are we looking at this year, given all of these tailwinds in general?
I think it will be very good. What can I say? We are putting effort into everything. Something will work out. There are so many missiles and rockets. Something will work.
I'll just add maybe one thing, that there are certain consumer-side financial services which were slightly challenged. because as you know, equity trading volumes went down a year ago. Until about six months ago, we were seeing headwinds in the personal loan business, and of course, we didn't have much of Postpaid a couple of quarters ago. Now that these things are starting to turn around, we are seeing significant upside on the consumer side. When we look at our LTV to CAC.
Yeah.
That has improved meaningfully, obviously, that is one of the reasons why we're making some investments on the consumer side. Over and above product, we're also investing in go-to-market.
Got it. One last question on AI. A, I wanted to understand how is AI helping you on merchant acquisition, onboarding, collection efficiencies? Is it making it measurably faster, and so you're seeing better retention trends? Any detail you can share on that? Second, also, I see your cloud costs have come off Y-o-Y here, and I'm wondering if you were able to release some compute costs because you used AI or whatever else you used to figure out where you had scope for efficiencies. Just a little bit of color on how you're using AI on the productivity side beyond employee costs would be helpful.
Vijay, first of all, thank you. Somebody saw what I wish somebody would have saw and asked. You heard that people are saying, token mixing means so much of cost. My whole year cost became out of cost in the quarter. That kind of situations. We tune our own model, place on our own infra, then run it. You must have heard this popular make this phone call for, let's say, collection or revisit or retention and so on. We took 200 billion parameter model, optimized it to 4 billion parameter model, made for Indian languages, our own model, and then we placed it on our own machine. Effectively, now you're talking about low latency, low cost of tokens this is low inference cost.
Yeah.
Run and operated by us.
That makes our cost even lesser than the typical company would have costed for themselves.
I see.
Removed the cost of call center.
I see.
The cost which otherwise you would have bought from outside, and we have optimized and added a skill to us. This is the magic, and once we've done it, we'll sell it to outside people. Why will we not sell it? Actually, I'm super excited about the kind of new non-payment, non-financial services. I'm using the word as a description.
Okay.
They're not related to payment, they're not related to financial services, and they're perfectly completely AI in, AI out services for our businesses and merchant partners. We've decided not to.
Okay.
Go AI for consumer as a all-in bet. We definitely have decided that we will go to the merchants and the businesses, and the solution services that we've created, and we ourselves are the user of them. These things-
I see.
Will show up as revenue item. I'm glad that you looked at the compute cost. To the credit of Madhur, he would negotiate it so hard that they will invite him as a CEO conclave elsewhere in the world. This is the most efficient CFO now. Madhur literally has become Cursor's CFO council's founding member, where the CFOs who bother about cost and productivity, they probably have four, five people only in the world.
Good to hear, congratulations for that, Madhur. Just one follow-up on that, and then I'll go back into the queue. The non-payments, non-financial services you're talking about, these are AI services for smaller merchants [crosstalk]-
[Non-English content].
I see. Okay.
Flipkart payment , or let's say offline retailer merchants. [Non-English content]
Okay.
Small people, smaller businesses will take a different kind of service. Larger ones will take a different kind of product.
Okay. Good to hear. Thank you so much, and best of luck to you guys.
Thanks, Vijay. We will take the next question from Pranav Kshatriya, followed by Rahul Jain from Dolat Capital. Pranav, you may please go ahead.
Thanks for the opportunity. My first question is, on the accelerating GMV trend. It was like 23% odd in Q3, went to 27% in Q4, now 31%. Any cuts you can provide that, what is driving it? The letter actually says that offline is seeing strength, online is seeing strength. What is exactly, if you can give, what is growing faster relative to each other? Secondly, in payment processing charges, are there any charges related to Postpaid also sitting there? That saw a reasonably sharp jump on a quarter-over-quarter basis in this quarter.
On the first one, we are seeing acceleration in each of our payments businesses. Whether it is large merchants offline, small merchants offline or online, they historically were growing at different paces. As you know, online business was also under embargo, that is obviously a headwind. The increase in growth has come in all of those businesses, including the consumer side, as you mentioned. Yes, there is an interchange that we have to pay in Paytm Postpaid basis, the network math that credit line on UPI has, and some of that goes into payment processing cost. As you can imagine, some of the growth that we are seeing in revenue on payments is also coming from, for example, greater share of credit card processing, which also adds to payment processing cost.
Can you talk a bit about how RuPay credit card on UPI is progressing? We were seeing a very strong growth, but I don't really see any mention of that in the letter.
I think maybe you don't see a mention just because we have said it enough times that the payment processing margin has been steadily going up because of mix. One of the mix aspects is absolutely RuPay on UPI, which continues to see good increase in adoption, small and large merchants both.
Okay. If I look at on the cost side, there has been 6.5% decline in the employee cost ex of sales cost, and this is despite the appraisal. It seems like a fairly sharp cut in the employee cost. How should we see this going forward? Is this a baseline which is sustainable? Is there any ESOP cost timing sort of impacting that or any colors there would be helpful.
[Non-English content]
There are minor fluctuations that will exist quarter on quarter. Nothing specific to call out, nothing that is going to change our trend lines in any major way. Like we have said, we do expect to continue to improve EBITDA profitability at that. The overall guidance on indirect expenses is that despite investments in sales and marketing, it will grow a lot slower than revenue.
Okay. One last follow-up on the first part, actually. GMV growth acceleration, is this sort of sustainable from your point of view currently-
Yes.
You think on a high base there can be some challenges?
[Non-English content]
Thank you so much. Nice talking to you. All the best for your next quarters.
Thanks, Pranav.
Thanks, Pranav. We will take the next question from Rahul Jain, followed by Jayant Kharote from Axis Capital. Rahul, you may go ahead, please.
Yeah. Thanks for the opportunity. Firstly, if I look at the DLG data that we talked about, finally for the month of June, it is now coming on a Y-o-Y growth trajectory. If you could tell us why this journey has been in such a manner where it scaled up pretty fast, then it kind of saw some moderation. It appears it came from just one specific participant or partner, and then it's scaling up across portfolio. Any big picture thought process you could share on the DLG side?
You should look at year-on-year GMV. I don't have a comment on the specific month. I haven't frankly sort of dug into that specific month data. I think we have said in the notes that I think in the context of revenue, but this applies to GMV as well, that it is very broad-based. It is coming from every type of merchant category where we are seeing every type of payment category where we are seeing faster growth now than we saw a couple of quarters ago. It is not concentrated towards a few merchants or even one or two payments businesses.
Also, this specific comment that we made upon that we could reach a further 20% margin on a long-term basis. Is it that we see that the indirect expenses could grow by 10%, give or take, on a long chart, and the X of payment business can grow 70%-80% incremental revenue into profitability? We are seeing acceleration on growth, we could see that the next milestone, once we achieve the 15% mark, could be that we might guide a bigger band, like 20%-25% kind of a thing. What make you come to that thought process right away?
I think away from specific numbers, Rahul, that what we are referring to there is that first, the market opportunity remains massive, right? We still feel there's a huge amount to do, not just in financial services, but actually in payments as well. The long-term TAM for us is massive, and as a result, I happen to think the terminal value of this business is fantastic. The second catalyst for saying that is because AI just makes you leaner as an organization. Finally, your point about marketing services and financial services incremental revenue being very high on EBITDA margin. That is absolutely correct, thank you for that observation.
Fair enough. That's it from my side. Thank you for the opportunity.
Thank you.
Thanks, Rahul. We will take the next question from Jayant Kharote, followed by Suraj Das. In order to accommodate a few more questions, we will extend this call as well.
Jayant, you may go ahead.
Thanks, Anandita. Hi, Madhur. Hi, Vijay. Congrats on a great set of numbers. First question is actually around the industry and lending. Of course, merchant lending is a great product market fit with the device and collections. One thing that's been concerning a little bit to me is, in the last one or two quarters, the disbursement by digital lenders in the personal loan space has mushroomed to around INR 25,000 crore-INR 30,000 crore a month, which means we are going to build INR 300,000 crore-INR 600,000 crore of a high APR, 30%-31% APR kind of a personal loan book at a systemic level in the next 12 months.
One concern I had was obviously regulatory, right? If INR 500,000 crore-INR 600,000 crore of book is getting built up, there could be some sort of thought. The question is around merchant loan. If the APRs in this product are to be moderated down to the better quality merchants over the next couple of years, does that affect the profitability of this product? Of course, I want to know because the credit cost will also come down, right? That may take care of some of that.
Second part, I can tell that we already have started and proactively done different lower APR products and we basically now do EDC devices where the merchant has more choices or more options or the pricing is pretty competitive. Just in case we do, and internally we've gone all stack. We look at it merchant as now our strategic customer base where we don't see only one kind of product, but multiple buckets of product. The lower APR is not going to be surprise. Rather, we will lead the market. If some competition walks into this space, we will just aggressively go and play lower APR business and wherever the logic will be, just in case. We are already doing it. As far as Kanjivaram is concerned-
Yeah, sure. I think on your first point, I don't have a specific comment on the top-down math that you shared. I can just share with you what we hear from our lending partners. Like I mentioned, we have a double-digit network of lending partners in personal loans. One is that they were very conservative for eight, 10, 12 quarters. As a result, there is actually a desire to do more unsecured lending today because perhaps as a percentage of their AUM, this number has come down quite a lot. They are also seeing very healthy customer balance sheets when they're doing pure and other scrubs. There is a desire to grow in this segment from various lenders.
The second is what Vijay alluded to earlier, which is that our personal loan business is distribution only. We don't do collections here. We don't do FLDG and so on. It really is helping lending partners find customers on our platform and distribute loans on our platform. Where we are seeing very healthy quarter-on-quarter growth now after eight or 10 challenging quarters.
Great. I appreciate what Vijay said, that we should be taking the lead in this, rather than wait for the industry to do that. That's great to hear. The second question is kind of a repetition of last quarter, Madhur, sorry to bring it up again. When that GMV growth of 31% not translating to net payment revenue growth, which is at 25%. When margins are expanding, again points out to the same thing as the subscription income lagging, right? I do see a comment that you've called out. How should we think, because at some point, this will start playing into the net payment revenue growth, right? I want to know maybe from a 12-24 months perspective, at what point does the subscription rentals start kicking in?
I think you've got it right that net payment margin is payment processing margin plus subscription. On subscription, we have mentioned that in a few percentage of cases, we do these waivers for our merchants and also the tighter revenue recognition policy. We do think overall, when we look at our merchant payments business plus the merchant loans, those payback periods are actually improving. Overall, that business is getting significantly more profitable as we move forward. I don't have a specific concern about how we monetize our merchants. In fact, our monetization over any period or cycle is very healthy, and this is despite the PIDF going away. We feel very good about our payback periods.
The pace of deployment is not going to slow down anytime soon?
No. We have said broadly INR 25 lakh-INR 30 lakh additions a year. We are very much within that band. Maybe additional investments could make that go even higher. Like I said, the TAM is massive. We have very high conviction on providing payment services to our merchants, especially small merchants, which is what we are talking about here. That pace should continue.
Great. Congrats once again for a great set up.
Thank you.
Thanks, Jayant. We will take the next question from Suraj Das, followed by the last question for the day from Pranav from Bernstein. Suraj, you may go ahead.
Yeah, hi. Thanks for the opportunity. I have two questions. First one, if I look at the, say, the transaction breakup between merchant and non-merchant, the non-merchant piece is growing phenomenally well, I think almost 100% Y-o-Y. Versus if I look at your MTU growth, that is high single- digits, steady, and then robust. Which means that the consumer on the P2P side in terms of transaction frequency, that is increasing. Right?
Can you highlight what are the underlying drivers here? Is it because of only the traction in the Postpaid or, I don't know, is it because of bill payments or maybe campaigns like gold coins or something like that, which I am assuming that reflects here. Second part to this question is, hypothetically, let us say if your P2P growth is higher within the payment business versus P2M, over a period of time, the net payment margins would have ideally negative bias, right? Because the P2P is a lower net payment margin business. That is my question one.
I'll start. Suraj. P2P is not a lower payment margin. Actually, P2M is a lower payment margin because in P2M, government gives the incentive as a year-end, and the last year's incentive has not even come. While in P2P, you earn from originating bank and the bank link and so on so forth. P2P actually is a revenue line item. There is no wrong about this, that P2P makes less money. For merchant, obviously, P2M is the only revenue line item. P2P is less revenue making is not a correct statement. You nicely looked at. We focus on retention. In consumer business or internet business, retention is winning new customer. A good customer brings a new customer.
We've all focused on instead of spending, spraying money in marketing, but rather making the customer who's with us feel delight and become more active user of Paytm. The usage is not by Postpaid. Postpaid is not even INR 1,000 crore in a month. Let's just say that. We're talking about what number every day. Here it is. It's not led by Postpaid. We've simplified the app if you are the user. If you're not, then please use the Paytm app.
Nice.
[Non-English content] The intent here is that, in my opinion, the ease and the features that we sort of have nuanced, brought out is giving us this growth. Obviously, a new customer in terms of Gen Z is coming, and we sort of have the fancy of Gen Z customer as our customer base now. There it is.
Sure. Got it. The last question is, in terms of the financial services business, if I look at you are adding, let us say, one to lakh customers on a Y-o-Y basis, and if I look at the overall financial services segment revenue per customer, that is also growing. Question is, do you think this is sustainable and can be only one-way direction? There are so many moving parts, maybe in terms of product mix, unit economics, and hence commenting on the sustainability of one way going up is a difficult task.
[Non-English content] I would rather say that there is a huge upside. Order of magnitude multiple, not percentage. It's rather the attention that we've started giving to it. That person ensures to active brokerage, very useful. Similarly, credit, Postpaid, and then taking consumer loan, then insurance, then boom. I would rather say that I don't know how to say this. The very fact that internally we are so excited and ready to say that we will grow profit margin and profit itself is because the customer base and the product market fit and the business model has got scalable and then head down execute only that, and you are all good.
Just to clarify, the INR 7.6 lakh number, we think that barring any quarterly aberrations, this number should just nearly grow up. We talk about revenue per financial services customer. If you look at the average revenue that we make today, obviously there are some products which are higher than that and some products which are lower than that.
Yes, there's a mix effect point which may affect us a couple of quarters here and there, but we are confident overall financial services revenue will grow. We were thinking about what are the metrics that we should put out there for financial services customer, and financial services revenue. Key financial services customers was one of them, and as close a proxy to saying, hey, there's number of customers who are taking a product and the amount of money you're making per customer. Yes, within that, there will be some mix effect components.
Sure. Perfect. Thanks, Vijay. Thanks, Madhur.
Thank you.
Thank you, Suraj. We will take the last question from Pranav. Pranav, you may please go ahead.
Hey, good afternoon. Thanks for taking the question. Just a couple of one. First one is on, I'll go back to the payments margin. If I just look at your payments income as a percentage of GMV and also the payment processing costs, almost the entire drop in NPM seems to be explained by just the increase in payment processing charges from almost 10.6 basis points to 11.2. What's driving this sharp increase? That's the first question. The second one is more on the consumer business. The Commerce Cloud or the marketing revenue is almost flat year-over-year. Could you give some color on that? Or at least, if you take the broader consumer lens, how much is the revenue from consumer, be it FS or non-FS, really growing at? Those would be my two questions. Thank you.
Right. On the first one, Pranav, I wouldn't quite look at payment processing cost as a percentage because there's a huge amount of very good non-bank linked UPI business to be done. By very good, I only have one definition, does it make money? If you end up increasing your credit card market share, for example, credit card processing market share, this number will go up. So will revenue. That's why we point to payment processing margin and giving the exact number is slightly commercially sensitive, we give you kind of where we are directionally. I wouldn't quite look at it that way. It is the case that that number has gone up. Somebody asked whether it was because of Postpaid, yeah, marginally, but actually because we are doing quite well on non-UPI business overall.
That will not really give you the type of conclusion you're trying to get. On marketing services, we are seeing good momentum, partly because of we have more MTU, we have very good retention metrics. Vijay mentioned DAU is higher than it was in January 2024, and so on. We're getting not only more customers, we're getting more engagement. Another indicator is our MTU was up about 8%, but our consumer side GTV was up 45%. That's another indication for how much we have worked on engagement of customers. All of that does translate with a slight lag into marketing services revenue, as well as other consumer financial services revenue downward. This quarter, we're slightly behind on one specific line item, which is Travel, where there were headwinds.
I think it was not headwind, it was headfire.
Headfire.
The fire of the head.
When ticket prices go up, then obviously airlines' overall business gets affected. Within that, leisure gets affected, which is vast majority of what our customers do on Paytm Travel. That business was slightly behind our expectations, but for external factors. We are quite positive about marketing services overall going forward.
Okay. Marketing service, I understand, is like the travel headwind, or headfire, but if you look at the broader consumer revenue, how is that growing? Is it like single- digit, double- digit growth? What are we talking about here?
It is actually-
I'm just using the monetization. Where are we in the monetization of that-
You are accounting for every monetization, not just payment line item, but credit disbursement and the Oh, then it should be definitely-
Yeah. It is not far behind the merchant side. It is not night and day, because we have talked elsewhere, just to pull together a few things that we have said in the document, which is that we are seeing tailwinds in the personal loan business. You can imagine that is now growing well. Paytm Postpaid is contributing, which I talked about wealth earlier, and which also talked about consumer P2P, which makes revenue. There are various bits and pieces of this on the consumer side, which are giving us better LTV already.
Okay. Would it be fair to say if you have an overall revenue growth of 20%-30%, it is not completely skewed in favor of merchant, it is somewhat comparable growth across both merchant and consumer?
That's right.
Very nice. I like the question because I want to tell you one thing. My personal role is to prune everything that drags down my company's growth. Either you give me growth or bottom line, everything else is thank you so much.
I think we may have anticipated this question because the first thing that we said on page one was broad-based accelerated growth-.
Yeah.
In payments and financial services for merchant and consumer business.
Yes.
Okay.
Obviously, the nuance of the keywords that we specified had to be specified.
Is great. I'm glad you're asking us to clarify.
Yes.
Thank you. Those are my questions.
Thank you.
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