Motilal Oswal Sees Paytm’s EBITDA Breaking Even By FY25

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Motilal Oswal, a brokerage firm, has predicted that Paytm, the Indian fintech major, is expected to reach EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) break-even by the fiscal year 2025. The brokerage has initiated coverage on Paytm with a “buy” rating. Motilal Oswal believes that Paytm will emerge as a key beneficiary of the rising size of India’s payments ecosystem. The total payments industry is predicted to double to $16 trillion by 2026, with digital payments expected to surge about three times to $10 trillion by 2026. Paytm, as one of the leading service providers in the growing industry, is among the largest payment platforms, with a gross merchandise value of approximately INR 13.2 lakh crore in FY23. Paytm offers payments, financial services, commerce, and cloud services to a large consumer and merchant base of about 350 million and 31.4 million, respectively, as of Q3 FY23. Paytm’s net loss halved year-on-year (YoY) to INR 392 crore in Q3, while its operating revenue surged 41% YoY to INR 2,062 crore. Motilal Oswal expects Paytm’s operating revenue to stand at INR 7,850 crore in FY23 and surge to INR 13,220 crore in FY25.

Motilal Oswal said that while this would be beneficial for PPI issuers, as it will aid the overall revenue, the total impact for Paytm would depend on its wallet usage on non-Paytm QR or online merchants. Further, some of the revenue is likely to get offset by the implementation of wallet-loading charges, it said. According to Motilal Oswal, the recent circular issued by the National Payments Corporation of India (NPCI) allowing prepaid payment instrument (PPI) issuers to charge an interchange fee of 1.1% for merchant transactions of more than INR 2,000 could be beneficial for PPI issuers, including Paytm. However, the total impact on Paytm would depend on the usage of its wallet on non-Paytm QR or online merchants. Additionally, the implementation of wallet-loading charges could offset some of the revenue gains from the interchange fee.