InvestorQ : Why are investors suddenly becoming so bullish about Paytm?
Niti Shenoi made post

Why are investors suddenly becoming so bullish about Paytm?

ishika Banerjee answered.
2 weeks ago

It is interesting how things change rapidly in the capital markets. Just a few weeks back, everyone wanted to avoid Paytm, and suddenly investors are starting to see deep value in Paytm. One thing that appears to have surely worked in favour of Paytm is that One97 Communications has prioritised the payments and the distribution of lending products businesses as a criteria for the allocation of capital. The company is also confident of turning to operating profitability by the second quarter of FY23.

The company has recorded rapid growth in payments and a huge scale-up in its lending and payments devices businesses. Its model is something like this, While the customers are typically acquired for payment services, the margins come from upselling financial services. Paytm largely leverages its distribution and transactional insights. One of its most popular products today is the Buy Now Pay Later (BNPL) scheme which allows credit to consumers at the point of sale and has gradually become a preferred choice for merchant customers.

The numbers from its partnerships with financial institutions is mind boggling. In FY2022, Payt saw more than 15.2 million loans disbursed on the Paytm platform which is a yoy growth of five times, albeit on a small base. The big takeaway for the investors in Paytm now is that due to its strong network franchise, customers are coming on to the Paytm platform even without requiring any incentive from the company. Paytm no longer has to pay the users to transact on their platform.

What probably excits the invites is that Paytm is moving up the value chain. From being mere QR payments outfit to graduate to devices and then enhance their offering to credit is something that helps to leverage the original customers and also upsell for higher margins and better customer retention. It is this unique value chain advantage with the merchant customer at the centre that is making Paytm look so exciting for the investors at large.