Even though Paytm managed to reduce its indirect expenses by roughly 7.5% to INR 1,000 Cr in Q3, direct costs grew by 13% on a QoQ basis. In contrast, on a sequential basis, revenue grew at a slower rate of 10% from INR 1,659 Cr.<\/p>\n
This indicates that the revenue growth has come as a result of higher spending on payments processing charges, cashback and incentive costs and other direct expenses. In fact, much of this spending has gone towards reclaiming the market share lost after the RBI action on Paytm Payments Bank.<\/p>\n
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In the meanwhile, the competition has caught up to Paytm in terms of revenue and we can expect an intense battle in the year ahead from the cohort of super apps in India. From PhonePe to CRED to Flipkart-backed Super.Money, Navi and others, a number of fintech heavyweights have looked to capture Paytm\u2019s lost market share in UPI, personal and merchant loans, merchant services and even digital commerce.<\/p>\n
These companies are building from a position of strength in many cases, whereas Paytm is looking to revive its brand and flywheel after the setback over the past year. How far behind is Paytm today?<\/p>\n
Paytm Picks Profitability Over Growth\u00a0<\/b><\/h2>\n
Outside the quarter-on-quarter comparison, it must be noted that Paytm has consistently reduced expenses on a YoY basis in FY25 in line with slow growth guidance after the RBI action on Paytm Payments Bank. This has resulted in improved profitability, but at the expense of revenue and customer growth.<\/p>\n
Maintaining this profitability will be a huge challenge for Paytm, especially because future payments revenue growth is highly dependent on sales employees.<\/p>\n
Even though the company hired close to 2,000 sales employees between September and December 2024<\/a>, the overall costs for sales employees have fallen marginally in the quarter.<\/p>\n For instance, overall employee cost (excluding ESOPs) fell by 6% QoQ and 29% YoY to INR 575 Cr.\u00a0 Employee costs in FY25 (April to December) fell by INR 451 Cr compared to the same period in FY24, in line with Paytm\u2019s guidance in January 2024 of having to cut employee costs by INR 400 Cr – INR 500 Cr.<\/p>\n Even non-sales employee costs \u2014\u00a0 business, operations, technology and support roles \u2014\u00a0 fell by 11% QoQ and 36% YoY, Paytm said, on the back of AI adoption for improving productivity across businesses.<\/p>\n The clear indication is that Paytm\u2019s salaries and incentives for its salesforce and non-sales teams have fallen considerably in the past quarter. The big question is whether the company can accelerate growth while continuing to reduce employee costs, spending on marketing and customer acquisition?<\/p>\n There\u2019s little doubt that the cost-cutting has led to slower revenue growth in FY25 for Paytm. The company is not even close to the Q3 FY24 revenue mark, and it\u2019s becoming increasingly clear that the RBI action on Paytm Payments Bank has set Paytm back by more than a year in terms of the revenue expectations.<\/p>\n And it\u2019s given competition a huge advantage and opened up the path for the likes of PhonePe or CRED to take over from Paytm. Even as Paytm has battled business slowdown and attrition of customers, rivals such as PhonePe, CRED and others have continued to make great strides in terms of revenue and profitability.<\/p>\n For the sake of the comparison, we will be considering FY24 numbers for PhonePe and CRED, both of which also reported losses in FY24 like Paytm. While both these rivals had lower revenue than Paytm, the headwinds of the past one year have slowed down the Delhi NCR-based giant significantly.<\/p>\n Like Paytm, PhonePe and CRED have both adopted a super app model banking on cross-selling services such as personal and merchant loans, insurance, digital commerce, travel bookings and more. For all three apps, the UPI payments service is a means to attract customers at the top of the funnel, then cross-sell services to the most active of these customers.<\/p>\n Given the poor revenue dynamics for UPI payments \u2014 zero MDR and high cost of operations \u2014 all three super apps need to build significant bridges to other services to further leverage UPI customers.<\/p>\n In terms of the revenue scale (as of FY24), Paytm is well ahead of these two rivals. However the past year has resulted in grave growth challenges for Paytm, which threatens to weaken its position as the largest fintech company in India by revenue.<\/p>\n <\/p>\n CRED\u2019s operating revenue jumped 71% to INR 2,397 Cr in FY24<\/a>, while PhonePe reported operating revenue of INR 5,064 Cr in FY24<\/a>, up 74% from the previous fiscal. In comparison, Paytm reported income of INR 9,978 Cr in FY24, comfortably more than the two rivals combined.<\/p>\n But, after three quarters of FY25, Paytm is well shy of PhonePe\u2019s FY24 revenue. Paytm\u2019s quarterly revenue for Q1, Q2 and Q3 FY25 has been trending 35% lower than the respective quarters in FY24. If this trend continues, Paytm could finish FY25 with around 30%-35% lower revenue than FY24, which would put its annual income in the ballpark of INR 5,300 Cr<\/p>\n So in effect, Paytm\u2019s revenue in FY25 could be similar to what PhonePe reported in FY24. In fact, if the Bengaluru-based unicorn maintains the revenue growth rate seen in FY23 and FY24 \u2014 77% and 74% respectively \u2014 PhonePe could well emerge as the leading fintech app in India by revenue as of March 2025.<\/p>\n This comparison is of course subject to Paytm and PhonePe holding their current course for the next quarter as well.<\/p>\n What Paytm would be banking on between now and March 2025 is a huge spurt in its lending business, which was severely dented by the RBI\u2019s regulatory action on the payments bank.<\/p>\n But on the basis of the past three quarters, the company has an uphill climb in this regard as well.<\/p>\n The company\u2019s revenue for financial services in the quarter increased 34% on a sequential basis to INR 502 Cr. But for the full fiscal, revenue growth was stifled as a result of the second order impacts from the regulatory challenges.<\/p>\n Personal and merchant loans made by the bulk of this category. Paytm\u2019s financial services business also includes insurance distribution, equity broking and mutual fund distribution.<\/p>\n Revenue from lending was down by 17% YoY, and overall financial services revenue for 9M FY25 was INR 1,158 Cr, 32% lower than the same nine month period FY24.<\/p>\n Even when it comes to the customer and user metrics, it was a challenging quarter for Paytm. The number of financial service customers fell to 590,000 in Q3 FY25 from 810,000 in Q3 FY24.<\/p>\n The only silver lining for Paytm was that the merchant loans portfolio grew 16% QoQ to INR 3,831 Cr as a result of the introduction of default loss guarantee (DLG) terms with lenders in the previous quarter.\u00a0 The company said it will also increase the DLG offered to lending partner Shriram Microfinance India Credit for merchant loans from INR 225 Cr to INR 350 Cr.<\/p>\n \u201cOur revenue was bolstered by better collection efficiencies and higher revenue from loans distributed under the DLG model in this and the previous quarter. [For Personal Loans] We have been primarily focused on the distribution only model, wherein we have seen reduction in disbursements on account of tightening risk policies by lenders, which is inline with industry trends,\u201d the company said in its earnings release.<\/p><\/blockquote>\n <\/p>\n The company also said it has resumed personal loans for a select group of customers (new and repeat) with income coming from distribution and collection of loans. \u201cWe see increased willingness from lenders to partner for these select customer cohorts and allocate capital in the DLG model, which will help to increase disbursements in the distribution and collection model.\u201d<\/p>\n Optimism Within Paytm\u2019s Ranks<\/b><\/p>\n Paytm president Madhur Deora told analysts in the earnings call after the Q3 results that the company has the opportunity of increasing the percentage penetration within merchant loans to maybe 10% to 15% of the total installed merchant device base, compared to around 5%-6% today.<\/p>\n \u201cThe ticket sizes have increased and they continue to increase. So I remember three years ago, this number was about INR 1,10,000, while currently the number is about INR 2 Lakh, and part of that is because the value per merchant has grown in Paytm. The merchants obviously are doing a lot more digital payments today than they were doing three years ago, especially our best merchants to whom the loans are sort of qualified for,\u201d Deora added.<\/p><\/blockquote>\n Paytm cofounder and CEO Vijay Shekhar Sharma has time and again said that the company is on the verge of turning things around after the past year. Sharma has reiterated multiple times that Paytm is looking at AI-first operations to bring more efficiency to its distribution-led model.<\/p>\n Deora elaborated, \u201cWe do expect that FY26 will be better than FY25, especially given that we are going to have additional partners going into FY26 for personal loans, so we do expect an increase in this business and a rebound from the lows that we saw last year.\u201d<\/p><\/blockquote>\n While Paytm would be banking on the network effects from its payments services and its ability to cross-sell to improve the financial services metrics further, getting there will not be easy given the stiff competition and the number of players in these spaces.<\/p>\n When it comes to insurance distribution, aggregators such as PB Fintech, InsuranceDekho and others have a clear market share advantage.<\/p>\n On the investment tech side, Paytm will compete against the likes of Groww, Zerodha, Upstox, Angel One and others that have a huge lead in terms of active investors. Groww and Zerodha can count on revenue from their AMC businesses as well, where Paytm does not have a presence.<\/p>\n Plus, these discount brokers are expecting slow volume growth in 2025 as a result of the changes in regulations for futures and options trading introduced in 2024.<\/p>\n And finally on the digital lending side, the entry of Jio Financial Services as well as the growing base of new platforms like Flipkart-backed Super.Money<\/a>, Adani Group<\/a> and others has complicated the situation for Paytm. Besides this, dedicated lending platforms such as MoneyView have also raised funds in the past year to target customer acquisition.<\/p>\n These platforms have partnered with the same lenders and would be competing for the personal and merchant lending pie from a different lens than Paytm, including a big push on secured lending, where Paytm has not yet launched products.<\/p>\n In that regard, the next quarter will be one of the most significant periods in the lifetime of the company. Can Paytm push forward from this position of competitive weakness and get back to its former self to dictate the terms of the fintech market in India?<\/p>\n","protected":false},"excerpt":{"rendered":" It\u2019s been a curious past year for Paytm. Even as the fintech giant has shown improved financial performance on paper…<\/p>\n","protected":false},"author":1081,"featured_media":495820,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"title":"Paytm Still Waiting For Revival, One Year After RBI Action","image":"https:\/\/inc42.com\/cdn-cgi\/image\/quality=75\/https:\/\/asset.inc42.com\/2025\/01\/ftr1.png","author_url":"https:\/\/inc42.com\/author\/nikhil-subramaniam\/","author_name":"Nikhil Subramaniam","category":"In-Depth","tags":"B2B-B2C","twitter":"Paytm has consistently reduced expenses in FY25 in line with slow growth guidance, but it's fallen behind the competition in terms of revenue","facebook":"Paytm has consistently reduced expenses in FY25 in line with slow growth guidance, but it's fallen behind the competition in terms of revenue","linkedin":"Paytm has consistently reduced expenses in FY25 in line with slow growth guidance, but it's fallen behind the competition in terms of revenue","push_notification":"","newsletter_snippets":""},"categories":[5475],"tags":[212177],"structure_data":{"company_type":"Listed Startup","author_name":"Nikhil Subramaniam","parent_category":"In-Depth","second_category":null,"development_type":"","post_story_type":"Others","shelf_life":"14 Days","primary_company":"paytm","second_company":null,"primary_industry":null,"series":null,"bucket":"Startup Ecosystem","sub_bucket":"Trends & Analysis"},"acf":{"twitter":"Paytm has consistently reduced expenses in FY25 in line with slow growth guidance, but it's fallen behind the competition in terms of revenue","facebook":"Paytm has consistently reduced expenses in FY25 in line with slow growth guidance, but it's fallen behind the competition in terms of revenue","linkedin":"Paytm has consistently reduced expenses in FY25 in line with slow growth guidance, but it's fallen behind the competition in terms of revenue","push_notification":"","newsletter_snippets":"","sentiment__tonality":"Positive","dh_short_body":"","dh_short_cta":"Tap To Learn More","dh_image":""},"yoast_head":"\nPaytm In The Fintech Super App Race<\/b><\/h2>\n
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<\/p>\nWhat Can Paytm Count On?<\/b><\/h2>\n