PayU eyes 5% profit margin after FY25 operating loss

PayU, a digital payments company, reported a 2% operating loss for FY25 but aims to reach a 5% operating profitability margin soon, according to CEO Anirban Mukherjee.

The company broke even in the second half of the fiscal year and generated US$498 million in revenue from its core payments business, as noted in Prosus’ annual report.

Mukherjee said long-term earnings may improve with UPI revenue, pending regulatory changes.

Currently, UPI payments remain free to promote digital adoption, and the merchant discount rate (MDR) is not applicable.

PayU has expanded its value-added services and acquired a 43% stake in Mindgate, which supports UPI processing for banks. It also owns Wibmo, a key card processing firm.

PayU’s total payment value rose to US$80 billion in FY25 from US$19 billion in FY19.

The company cut its cost per transaction to 1.8 rupee (US$0.02) from 2.6 rupee (US$0.03) in FY22. It plans further cost reduction by using generative AI in marketing and customer onboarding.

🔗 Source: The Economic Times

🧠 Food for thought

1️⃣ Zero-MDR policy drives payment companies toward diversification

PayU’s profitability challenges mirror a broader industry trend in India’s digital payment sector, where companies must diversify beyond core payment processing to achieve sustainability.

The government’s stance against charging merchant discount rates (MDR) on UPI transactions severely impacts revenue potential, explaining why PayU reported a 2% operating loss in FY25 despite processing $80 billion in payments 1.

This zero-MDR environment has transformed the economics of payments processing since UPI’s 2016 launch, with transaction volumes exploding from just 2 million in December 2016 to hundreds of billions today, creating massive scale but thin margins 2.

PayU’s strategic acquisitions, including the 43% stake in Mindgate (which processes UPI payments for banks) and ownership of card processor Wibmo, represent calculated moves to control more of the payment infrastructure value chain while diversifying revenue sources 3.

The company’s reduction in cost per transaction from Rs 2.6 in FY22 to Rs 1.8 today demonstrates how operational efficiency has become critical in a zero-MDR landscape where transaction volume alone cannot drive profitability 1.