A lending boost for Paytm’s valuation woes

Over the last eighteen months, Paytm has silently built a lending powerhouse. Now, the results are showing, and how.

In the quarter ended September, Paytm disbursed Rs 7,313 crore worth of credit, primarily driven by personal loans and buy now pay later (BNPL) offerings. For context, the amount disbursed in this three-month period is almost as much as the Rs 7,600 crore Paytm disbursed in the entirety of the year ended March 2022.

Paytm founder and CEO Vijay Shekar Sharma has reiterated the importance of lending. “We have stated that our core business is to acquire payment customers and distribute loans. Everything else has to amplify either the ability to acquire payment customers or amplify the ability and capabilities of disbursing loans,” Sharma told analysts during the company’s June quarter earnings call in August.

Lending has emerged as a rare saviour for Paytm. Other bets, such as wealth management and insurance, have flattered to deceive. Paytm Money, its wealth business, continues to lag behind peers such as Groww and Upstox in terms of active traders. Its insurance application, meanwhile, is still pending with the insurance regulator, IRDAI.

The bulk of Paytm’s financial services revenue comes from credit, said Sharma during the September quarter earnings call on November 8. The company generated around Rs 350 crore from financial services in this period, which mainly came from commissions from loan disbursals. This represents a nearly 400% increase from the Rs 89 crore in financial services revenue the company clocked a year prior.

Indeed, with credit as its engine, financial services has emerged as Paytm’s fastest growing business. For comparison, payment services for both merchants and consumers—the company’s other major focus area—grew just around 55%.  

Credit is fast becoming a major contributor to the company’s overall revenue as well. In the September 2021 quarter, credit accounted for just about 8% of Paytm’s operating revenues. Today, it contributes 18% of the company’s topline.