Paytm is a leading fintech Indian company with various monetisation sources in the commerce, payments, and financial sectors. Paytm is going through a model shift while moving from growth at any loss to profitability at scale. The best catalyst to do so will be a moderation in Q2 indirect expenses. As highlighted by a global broker, the key risks of this company will be less growth in monthly transacting users, adverse regulatory perils to payment MDRs, restriction on digital lending, and reduced loan growth.

Paytm is expected to maintain its EBITDA profitability by September 2023. However, investors are skeptical about this goal as there have been only negating gains since last year and a tremendous increase in indirect expenses from the time of listing. JP Morgan stated that the contribution margin must have an increasing tailwind of incentive income from a below-normal loss rate in a syndicated loan. Furthermore, they must scale up their UPI candidate to merchant subsidies and issuances of co-brand credit cards.

JP Morgan anticipates another increase in the contribution margin by 60% and hopes the Q2 earnings on the loss reduction will act as a critical catalyst. The financial business services will, however, remain a value driver. The financial services cross-selling, device monetisation in payments, rising ad monetisation, and ticketing recovery of Paytm are expected to have excellent revenue growth.

The second most significant issue in the primary market was launching the mega IPO, via which Paytm wanted to raise Rs 18,300 crores through the initial stake sale in November 2021. Paytm has been dwindling since listing and lost over 70% of the issue price. The price dropped from Rs 2,150 to Rs 635 per share on Friday.

Brokers believe the Q2 earnings can serve as a key to visualising the loss reduction for breakeven, which will happen in September. Indirect expense increase drives the operating jaws in EBITDA losses. Paytm reinvested its gains from the contribution margin into building business and marketing strategies which did not happen in the EBITDA margin.

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