One 97 — Q1 FY26 earnings call

Call held 22 Jul 2025

Management summary

One 97 Communications (Paytm) reported a strong Q1 FY26, achieving positive EBITDA of 4% and a robust 60% contribution margin. The company saw an incredible quarter for merchant disbursements and maintained its POS market share. While financial services revenue was ₹561 crores, the lending book's AUM declined over 40% due to changes in DLG strategy, and personal loan recovery remains linear, with the Rs 50,000 ticket loan issue still an overhang.

Highlights

  • Achieved positive EBITDA of 4% in Q1 FY26, marking a significant milestone. (Mr. Madhur Deora)

  • Contribution margin reached 60%, a substantial improvement from 50% in the same quarter last year. (Mr. Madhur Deora)

  • Financial Services Revenue stood at ₹561 crores, demonstrating continued business activity. (Mr. Vijay Shekhar Sharma)

  • Increased POS market share, indicating strong competitive positioning. (Mr. Vijay Shekhar Sharma)

  • Experienced an incredible quarter for merchant disbursements and portfolio quality. (Mr. Vijay Shekhar Sharma)

Concerns

  • AUM for partner portfolio is down over 40% due to DLG stance changes. (Mr. Madhur Deora)

  • Personal loan recovery is linear, not significant, with the mix between personal and merchant loans remaining roughly the same. (Mr. Madhur Deora)

  • The Rs 50,000 ticket loan issue continues to be an overhang on BNPL and personal credit recovery. (Mr. Vijay Shekhar Sharma)

Key financials

  1. Financial Services Revenue ₹561 Cr
  2. Contribution Margin 60% +20%YoY
  3. EBITDA Margin 4%
  4. Financial Services Customers 5,60,000 customers

What they filed

Q1 FY27: revenue down 32.6%, net profit up 193.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,265 1,492 1,599 1,586 1,681 +33%1,553 +4%1,005 −37%1,069 −33%
EBITDA-421 -208 -81 76 88 +121%84 +140%-15 +81%87 +14%
Net profit821 -205 -581 63 -264 −132%145 +171%119 +120%185 +194%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

medium confidence
  • Capex Capex disclosed
    we did more device pickups than we had done in the previous quarter because that says it's a dramatic amount of capex. So the opex is significantly lower than the capex of the new device.

Guidance & targets

Profitability

  • EBITDA Margin Profitability · next two, three years · High confidence 15% to 20%
    We do think that what we had said earlier about 15% to 20% EBITDA Margin over the next two, three years is still the number to drive towards.

    — Mr. Madhur Deora

  • Contribution Margin Profitability · going forward · High confidence high 50s
    We have set high 50s, so we want to just leave some room for quarter on quarter aberrations. But we do think this is the right ballpark for us going forward.

    — Mr. Madhur Deora

  • EBITDA Margin Profitability · between now and the end of the year · Medium confidence significant improvements

    From 4% today

    But we do see significant improvements in EBITDA margin between now and the end of the year. We're currently at about 4 percent, but that is like 4 percent just in the first quarter that you have hit profitability.

    — Mr. Madhur Deora

Volume

  • Payment Growth Volume · from today · Low confidence 4-5x growth left
    So we continue to see that payment has 4-5x growth left in this country from today.

    — Mr. Vijay Shekhar Sharma

Monetization

  • Platform Monetization Monetization · six or twelve months from now · Low confidence a lot more monetization
    And maybe six or twelve months from now, we'll be getting a lot more monetization out of that.

    — Mr. Vijay Shekhar Sharma

What to watch in Q2 FY26

Personal Credit / BNPL Recovery

next quarter
Current Linear recovery, Rs 50k ticket loan issue overhang
Target Signs of accelerated recovery or resolution of Rs 50k ticket loan issue

Why it matters

Recovery of these non-linear products is crucial for significant revenue growth and profitability.

Mr. Vijay Shekhar Sharma: Sorry, it's not a question of BNPL around the corner. But my point was that there are line items that we have showcased in the past that have this dramatic peak. And like we just answered a few minutes back, it is rather the Rs 50,000 ticket loan kind of thing that is overhanging on it.

Risks & concerns

  • Regulatory overhang on small ticket loans

    high

    The Rs 50,000 ticket loan issue is an overhang impacting BNPL and personal credit recovery.

    Management acknowledged

  • Impact of DLG changes on financial services revenue

    medium

    DLG not being there means financial services revenue is lesser than it could have been, and AUM is down over 40%.

    Management acknowledged

  • Competition in payment devices market

    medium

    There are seven more players coming into the market, but Paytm believes its superior product offers differentiation.

    Management acknowledged

Q&A highlights

6 direct
Madhur Deora's re-appointment to the board Direct
Well, I've been on the board for about two and a half, three years, and there was never the intention that this should be a permanent thing. We wanted one executive director on the board, so I did a term, and now our General Counsel is being nominated for this.

Clarifies a significant corporate governance change and the strategic reasoning behind it, indicating a shift in executive focus.

Asked by Mr. Piran Engineer

Lending book mix and FLDG impact Partial
I think we'd rather not give the exact percentage, but I mean, you can see from our direct expenses decrease quarter on quarter, and that will give you a sense. We also report partner portfolio, AUM, on a monthly basis as per RBI guidelines. But I can tell you that that number is down, even that AUM number is down over 40%.

Reveals a significant decline in AUM (over 40%) due to changes in DLG strategy, impacting the lending business, though exact FLDG percentage is not disclosed.

Asked by Mr. Sachin Salgaonkar

Sustainability of contribution margin and EBITDA margin guidance Direct
I think one by one on contribution margin, we are at 60%, as you noted. Last year, in the same quarter, we were at 50%, so significant improvement there. We have set high 50s, so we want to just leave some room for quarter on quarter aberrations. But we do think this is the right ballpark for us going forward. With respect to EBITDA, so we're not doing adjusted EBITDA anymore. We're not doing EBITDA before ESOP costs. So of course, this is straight up EBITDA reported GAAP EBITDA.

Provides clear guidance on contribution margin (high 50s) and clarifies the shift to reporting GAAP EBITDA, indicating a more mature financial reporting approach.

Asked by Mr. Sachin Salgaonkar

POS business model and machine count Direct
The important thing is that we do not do that business where the bank owns the customer, and we are just putting hardware on behalf of the bank and calling it... We own the machine, we own the customer. We are in that business.

Clarifies Paytm's full-stack ownership model for POS devices and customers, differentiating it from other providers and highlighting their strategic advantage.

Asked by Mr. Piran Engineer

Price hikes on POS products Direct
I personally want to tell you internally we did increase the price and it worked out and sort of it's a funny thing. I mean, funny because internally when my team pitched it, because they said that we can try it, I was like, are you sure you will not see churn in the merchant? Then we found out that there is a reverse elasticity.

Indicates the company's pricing power and the perceived superior quality of their products, allowing for revenue growth without significant churn.

Asked by Mr. Jayanth Kharote

Non-linear revenue drivers (BNPL, Wallet, UPI Credit Card) Partial
Some of the consumer products, if you remember, we just talked about BNPL, we just talked about wallet. We just talked about many of those products. Those were non-linear. I mean, those were getting incredible top-line, bottom-line both. Once they start showing up, I'm going to tell you that that linearity just changes the orbit to the next level.

Highlights potential future growth drivers beyond current linear growth, emphasizing the strategic importance of BNPL and wallet products once regulatory hurdles are cleared.

Asked by Mr. Jayanth Kharote

GMV growth outlook Direct
Ma'am, I think, if you notice, the GMV growth is driven by UPI expansion and expanding the merchant base. And lately, we augmented our management team on online merchants because we already have had them onboarded for a long time. And by focusing on more farming, we hope to get even more growth.

Explains the drivers of GMV growth (UPI, merchant expansion, online merchant farming) and indicates continued focus on these areas for future growth.

Asked by Ms. Grishma Shah

Personal loan recovery and growth on existing base Direct
I rather believe that it will grow only on the existing base, because it is better to have a vintage customer whose value that you accrue or have understanding on the platform, getting incremental customers and cross-selling them.

Suggests a strategy of focusing on existing, high-value customers for personal loan growth rather than acquiring new, potentially lower-value customers, indicating a more conservative and quality-focused approach.

Asked by Mr. Vijit Jain

2 min read 6 chapters

Detailed narrative

Q1 FY26 Performance Overview

One 97 Communications reported a strong Q1 FY26, achieving positive EBITDA of 4% for the first time, a significant milestone. The contribution margin improved substantially to 60% from 50% in the prior year's same quarter. Financial Services Revenue for the quarter was ₹561 crores. Management emphasized that they are now reporting GAAP EBITDA, moving away from adjusted figures.

Lending Business Dynamics and DLG Impact

The lending book saw its partner AUM decline by over 40% due to a shift in DLG (Default Loss Guarantee) strategy, as lenders decided to forego DLG-based math. While personal and merchant loans both grew in revenue and disbursals, the mix remained roughly the same. The company is disbursing 30-40% of its capital availability and is actively pursuing other lenders to deconcentrate its lending portfolio. The recovery in personal loans is described as linear, with the Rs 50,000 ticket loan issue remaining an overhang.

Payment Business Strategy and Device Ecosystem

Paytm continues to focus on its payment services, which operated at breakeven this quarter. The company owns its POS machines and customers, differentiating its full-stack model from competitors. They have approximately 1.3 crore devices deployed, with 'roughly a million plus' being POS machines. Paytm has successfully increased pricing for its POS products due to perceived superior quality and stability, demonstrating 'reverse elasticity' in the market. The company is also driving credit card acceptance and EMI volumes, which are expected to boost net payment margins.

Profitability and Margin Expansion

The company achieved a 60% contribution margin, up from 50% YoY, and expects to maintain it in the 'high 50s' going forward. EBITDA margin turned positive at 4% in Q1 FY26, with management targeting 15-20% EBITDA margin over the next two to three years. They anticipate significant improvements in EBITDA margin by the end of the current fiscal year from the current 4%, driven by disciplined indirect expenses and high-margin revenue growth.

Capital Allocation and Operational Efficiency

Paytm is making significant 'capex' investments in device pickups, noting that the opex for new devices is significantly lower than capex. They are focused on creating more features for soundboxes to increase retention and reduce downstream costs. The company emphasizes its operational efficiency, particularly in refurbishments, due to in-house manufacturing and refurbishment hubs in India, which contributes to better payback periods for merchants.

Future Growth Drivers and Regulatory Environment

Management believes there is 4-5x growth left in the payment sector in India. They are actively working on non-linear growth drivers such as BNPL and wallet products, which are currently impacted by the Rs 50,000 ticket loan issue. The company expects more monetization from its platform within six to twelve months. They are also focusing on AI integration across all customer products and internal processes to drive profitable business.

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