InvestorQ : Is it true that Paytm has seen a sharp improvement in its credit lending product performance?
Lavanya Subramanian made post

Is it true that Paytm has seen a sharp improvement in its credit lending product performance?

Anamika Sodhani answered.
4 weeks ago

Paytm, or One 97 Communications, has not had the greatest of times on the stock markets post the listing. However, what has been positive is the steady growth in the size and stature of the credit book of Paytm. Paytm is making rapid progress in building up its loan book as well as showing aggression in onboarding lending clients on its Paytm platform. Digital credit is happening in a big way in India and Paytm is riding that trend, which is hardly surprising with its massive network of over 30 crore registered customers.

The loan numbers surely look exciting. Paytm has recorded 779% growth in the loan disbursements for June 2022 quarter at Rs5,554 crore. Even on a quarter on quarter basis, the lending business was up by 56%. In terms of volume numbers, Paytm has disbursed 8.5 million loans during the quarter, which is nearly 6 times of what it did last year in the similar quarter. That has led to the credit portfolio annualized run rate at Rs24,000 crore. But more than that, there is also an increase in average ticket size of the loan book.

Currently, Paytm aggregates digital loans in partnership with several banks and non-banks. Approximately, 19 million consumers and 1.2 million merchants are estimated to avail financing products directly from the Paytm digital platform by the year 2026. This is largely an outcome of the 38 lakh devices that Paytm has deployed at merchant stores. The increase in merchants eligible for loans is directly proportional to the Paytm platform spread since that is where credit is disbursed through.

That merchant credit scheme is better called the Buy Now Pay Later (BNPL) loan scheme and it is the big theme for the growth of the Paytm lending franchise. Currently, BNPL segment contributes 60% of its book followed by personal loans and merchant loans. There could be some pressure from the RBI announcement instructing non-bank prepaid payment instrument (PPI) to not load PPI using credit lines. This could dampen credit offtake especially with gross merchandise value (GMV) at Rs2.96 trillion in Q1FY23.