One97 Communications aka Paytm believes that it can sustain its operating profit growth after the fintech giant recorded an EBITDA (earnings before interest, taxes, depreciation, and amortization) of ₹31 crore during the third quarter ended December 2022.

What Happened? Paytm’s CEO Vijay Shekhar Sharma in a post-earnings call with analysts on Monday stated that its operating profit recorded in the third quarter of 2022, is ‘sustainable’, adding that EBITDA profitability will be an area of focus for the company.

The digital payments and financial services company last week posted a 42% increase in operating revenue while managing to reduce net losses to ₹392.1 crore in the third quarter.

Per what the CEO had to say, Paytm has calculated an incentive of ₹130 crore from UPI transactions in three quarters but that the incentive may technically make the fourth quarter a free cash flow positive quarter but Paytm will report as a one-time item.

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“UPI incentive will be one-off and we will explicitly call it out as a one-off. Rs 130 crore that we are quoting is for three quarters. The fourth quarter number will be topped on top of it. Because we are calling it a one-time item, we are not calling it free cash flow generative. We would rather say free cash flow generative when we are consistently sure of it,” Sharma said.

“We will continue to increase the EBITDA profitability. Could it go to two digits? In what timeline? I don’t know. But it could go to two digits for sure. But like I said this is sustained EBITDA growth that we are seeking from here on,” Sharma added.

Paytm’s revenue growth was driven by an increase in merchant subscription revenues, growth in loan distribution and momentum in the commerce business, said the company in a stock exchange filing.

The company’s net payments margin, or payments revenue excluding processing costs, more than doubled to ₹459 crore from a year earlier too while its operating profit margin improved to 1.5% from negative 27% during the same period last year.

Price Action: Paytm share price shot up by 2.69% to ₹573 as markets opened on Tuesday.

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Photo by Lakshmisreekanth on Wikimedia