Paytm looks to turn things around with focus on cash flow

Earlier this month, celebrated Indian tech companies posted not-so-celebrated results for the quarter ended December 2022.

Food delivery platform Zomato and logistics player Delhivery saw their losses widen. Meanwhile, the only profitable company of the lot – ecommerce player Nykaa – saw its net profit decline by 68%. Only two companies, Paytm and PolicyBazaar, narrowed their losses.

Photo credit: Paytm

Pressure to perform

One97 Communications, the parent firm of fintech giant Paytm, enjoyed these better-than-expected results, hitting the milestone of operational profitability three quarters ahead of its forecasts.

“We have achieved this milestone without losing sight on growth opportunities and keeping all compliances as well as risk factors under a strict watch,” the company said in an emailed response to Tech in Asia.

But is this milestone sustainable?

Madhur Deora, Paytm’s group CFO, thinks so. During an earnings call with analysts, he said that the target was achieved without cutting down on investments that “generate value.”

An industry insider Tech in Asia spoke to says there was “huge pressure on Paytm management to perform.” Within a year of its November 2021 IPO, the fintech major’s shares had slid 75% in one of the biggest global routs for a listed company in a decade.

The fintech company was later termed a cash guzzler, and doubts were raised over its ability to scale and turn a profit.

See also: Why was Paytm’s market debut a flop?

The results have taken some heat off of Paytm, with Macquarie Research upgrading Paytm’s shares from “underperform” to “outperform.” The company’s shares jumped 7% following the results.

Free cash flow machine

Vijay Shekhar Sharma, Paytm’s CEO, said that the company’s next milestone was to generate free cash flow.
“I don’t call it a free cash flow generating company. I wish to call it a free cash flow generating machine,” he said, adding that he feels “highly positive and inspired” by the adoption of the firm’s device business.

Paytm had 5.8 million subscriptions for its payment devices at the end of the quarter – an increase of 3.8 million subscriptions from a year ago. “We see sustained traction in device deployment with deployments of up to 1 million devices every quarter,” said the company.

Ringing in more revenue streams

Converting customers into profit