Paytm Shares in Focus After First-Ever Quarterly Profit

Paytm, the fintech platform operated by One 97 Communications, has reported a net profit of ₹123 crore for the quarter ended June 2025 (Q1FY26). This marks a significant turnaround from a loss of ₹840 crore in the same period last year. The company's shares gained in early trading following the announcement of the Q1 results.

Key Highlights of Q1 FY26 Results

• Net Profit: Paytm achieved a net profit of ₹123 crore in Q1 FY26, compared to a loss of ₹840 crore in the same quarter last year.
• Revenue Growth: Revenue from operations increased by 28% year-on-year to ₹1,917.5 crore, driven by growth in merchant subscriptions and financial services.
• Expense Reduction: Total expenses decreased by 18.5% year-on-year to ₹2,016 crore, primarily due to lower employee benefit expenses and marketing costs.
• EBITDA: The company reported a positive EBITDA (earnings before interest, taxes, depreciation, and amortization) of ₹72 crore for the quarter.
• Cash Balance: Paytm's cash balance increased by ₹4,764 crore over the past year, thanks to the monetization of non-core assets.

Factors Contributing to Profitability

Several factors contributed to Paytm's return to profitability in Q1 FY26:

• Cost Reduction: Paytm implemented cost-cutting measures, including reducing employee benefit expenses and marketing costs. Employee benefit expenses fell by 32% YoY to ₹642.6 crore, and marketing expenses were under ₹100 crore.
• Revenue Growth: The company experienced strong revenue growth, driven by an increase in merchant subscriptions and the distribution of financial services. Revenue from financial services doubled year-on-year to ₹561 crore.
• AI Integration: Paytm's efforts to streamline operations and leverage artificial intelligence (AI) have paid off, contributing to improved cost efficiency.
• Focus on Core Businesses: Following the Reserve Bank of India's (RBI) directive to wind down its banking unit, Paytm shifted its focus to core businesses and sharpened compliance processes.

Future Outlook and Analyst Expectations

Paytm expects further improvement in profitability going forward. The company is focused on merchant payments and lending, which are performing well. It is also preparing to reintroduce products such as mobile wallets and buy-now-pay-later (BNPL).

Analysts have mixed opinions on Paytm's future prospects. Some expect the company to continue its growth trajectory, driven by the increasing adoption of digital payments and the expansion of its financial services. Others are more cautious, citing concerns about competition and regulatory challenges.

Should You Buy Paytm Shares?

The decision to buy Paytm shares depends on individual investment goals and risk tolerance.

Potential Upsides:

• Growth Potential: Paytm operates in a rapidly growing digital payments market in India.
• Diversified Revenue Streams: The company has diversified its revenue streams through financial services and merchant subscriptions.
• Cost Efficiency: Paytm has demonstrated its ability to reduce costs and improve profitability.

Potential Risks:

• Competition: The digital payments market is highly competitive.
• Regulatory Risks: Paytm is subject to regulatory scrutiny and changes.
• Profitability Concerns: While Paytm has reported a profit in Q1 FY26, its long-term profitability remains a concern for some investors.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should conduct their own research and consult with a financial advisor before making any investment decisions.