A warm welcome, everyone. Thank you for joining our earnings call for the quarter ended June 30th, 2026.

As always, we are going to do this earnings call with management video switched on. We welcome attendees to ask a question with their videos on or off as they prefer.

To ask a question, you can raise your hand through your Zoom dashboard, and we will promote you as a panelist to ask your question. Today from Paytm's management, we have with us Mr.

Vijay Shekhar Sharma, Founder and CEO; Mr. Madhur Deora, President and Group CFO; and Mr.

Anuj Mittal, Senior Vice President, Investor Relations. In today's call, some statements made may be forward-looking in nature.

Actual events may differ materially from those anticipated in such forward-looking statements. This earnings call is scheduled for 45 minutes.

A replay of the call and transcript will be made available on the company's IR website subsequently. I would now like to invite our Founder and CEO, Mr.

Vijay Shekhar Sharma, to share his opening remarks. Over to you, Vijay.

Thank you.

Hi. Thank you.

Hello, everyone. It was quite a quarter, and I'm very happy that as a team that we've been able to execute it so well.

Especially, the consumer payment is something that is very close to me and we are now, as you can see, we especially talked about we are growing double the market share than the we're growing double the market growth of the UPI market, which effectively means we're gaining market share. Even though the GMV market share is what is publicly talked about, but the number of transaction market share, we are actually growing even further than that.

More retail customers are using us on higher frequency. I personally carry a benchmark in my mind, and that benchmark that I carried is about the let's say, January 2024 as a milestone where we sort of went through a special situation, and I can happily tell you that we just crossed the January 2024 daily transacting user, daily active user, or any other KPI that we could have kept.

The past is behind us, and now we are having cash in our hand and the aggression in our mind and body. Going forward, special attention in an aggressive way, I would put the word, on consumer market acquisition or merchant acquisition very clearly there.

The best part is that we've learned our art of building the business, where you can say if if I was to look at let's say, how do you make a profitable and growing profit business? We've been able to pull that up very, very well.

Going forward, as you would have seen that we have had our profitability increase, I would believe that I think we should be able to increase our profitability further consequent quarters right away onwards. Then, obviously, the revenue growth will mean larger profit.

I'm saying it because we we basically learned that you should not recklessly spend money on acquiring consumers or acquiring merchants if they're not monetizable. We've been able to grow the market share with the discipline that we want a selective customer.

We just don't want market share for the heck of it. We want monetization, and consumer monetization is something that we are very proud of.

Like we talked about it last time, we are looking at monetization using wealth beyond our credit and other financial services that we talk about any which way. If you were to look at a year forward, I think wealth will become, or equity brokerage, mutual fund distribution, although we're not wealth wealth in a traditional industry calls wealth, but we are talking about wealth as a overall internal bucket.

We put equity brokerage, mutual fund, this is one area that is very bright spot. I'm putting a lot of my attention there.

Payment sort of a product-market fit, consumer or merchant, both together, more aggressive growth. Credit, as you are aware, we're doing pretty good.

I think there is no aggressive instance required rather there because it is running perfectly well. It'll go towards wealth, which is where the aggression is required.

Beyond that comes the most important and consequal technology of our time, and that is AI. I am currently working on business and revenue line items that are non-payment, non-financial services, and I fundamentally believe that moving ahead of the optimization journey, we will start to see our revenue monetization journey of AI.

I'm very extraordinarily happy that some of our products have started showing up few lakhs of revenue, but it is important to know that we are going to, let's say, couple of quarters later, I wish less than a year, I'm able to say this line item, which will anyways go into Commerce Cloud, the traditional erstwhile Marketing Cloud business that we used to have it, in that line item, and that is the personally these two line items that I'm personally focused on. Thank you so much for all the support and guidance that you always been with us in the journey and days.

I am very happy to announce, and you saw this, that we are now joined by three more new independent board directors, new intention towards technology, business, finance, globalization, everything is out there. With this, we can start with the questions.

Thanks, Vijay. We will start our Q&A now.

The first question is from Mr. Manish Adukia from Goldman Sachs, followed by Mr.

Sachin Salgaonkar from Bank of America. Manish, you may please go ahead.

Thank you. Hi, Vijay, Madhur.

It's good to see you and fantastic set of results. Congratulations on that.

I wanted to delve a little bit deeper on the shareholder letter and some of the numbers and the results. Madhur, maybe the first question is to you.

On EBITDA margin, when you say that now you have higher visibility on the 15% to 20% margin number in the next 2 to 3 years, one, are you saying that you can get to that number sooner than what you had thought? Two, when you say higher margin in the long term, is there a theoretical number you have in mind and how should we think about what that higher margin in the long term may look like?

That is my first question, please.

I think at the core of it, Manish, the reason why we're saying what we're saying is that the revenue growth acceleration and the fact that indirect expenses are growing significantly slower than revenue growth, so that's what's giving us confidence to make both the statements that you pointed out, which is that we have higher confidence of getting to that number and perhaps getting to it sooner. We do think that AI structurally not only accelerates operating leverage, it also expands the opportunity for higher margins over time because you're just able to do more with less.

We have been able to deploy a huge number of applications and agents within our business, which are helping us become very efficient and we have talked about that in one of the pages in the deck. Yes, we are saying that both of those things are starting to come true.

Sure. Sorry, and my question, Madhur, also was in the long term, when you say higher margins, do you have a theoretical number in mind as to where you can get to?

Yeah. We aren't giving a number for that right now because, as it's a trade-off between just pursuing more growth and building an even larger business, which we absolutely think we have an opportunity to do in the areas that Vijay mentioned, and that will require investments.

Structural margins for our business are significantly higher than the 15% to 20% which we have said we would achieve in the near term.

Yeah. Manish, the thing is that we probably announced 8%

of

EBITDA margin this quarter. This is a ramp-up from here.

Eight has to grow forward, forward, forward. I know you were seeking a terminal number, and Madhur is saying that it is more than 15, 16.

The direction is that we are talking about higher profitability and higher profit both together, while we are quite cautious on these numbers.

No, very clear. Maybe a follow-on on that one is, when we think about growth, which you're saying, Madhur, has been accelerating and it's visible in numbers as well, with Postpaid ramping up now, you've started onboarding online merchants from late last year, consumer payments business is seeing market share gains, right?

With all of these together, is there any hurdles or downside risk to revenue? For example, this quarter if you grew 28% YoY, are there any downward pressures on revenues at all in the foreseeable future?

I'm not asking for a number as to what you can grow to, but just trying to think that could the accelerated revenue growth momentum continue in the foreseeable future or are there any downside risks that we should be aware of?

I think the great thing about this growth that we're seeing is that it is in nearly every business. We are seeing that in our payments on small merchants, payments to large merchants, consumer merchant payments that you mentioned, seeing that in financial services.

We're also seeing some of the smaller businesses growing very fast. You mentioned Postpaid, which is a good example of that.

We're seeing that pretty much across the board, and we think having achieved this number, we should aim for even higher.

Very clear. My other question was actually on Postpaid.

Now, you've qualitatively talked about the business doing well or ramping up, and FY 2028 being a year when it meaningfully adds to both revenue and EBITDA. When I look at, let's say, your earlier peak of Postpaid, which was about 9,000 crores in 2023, right, we are, I'm guessing, a lot lower than that number now.

Again, directionally, is there any reason why the company should not be able to get to that number at some time in the future? I'm not asking for a timeline, but maybe 3 years, 4 years, 5 years.

Are there any hurdles for you to not get to that number or directionally you are tracking to reach that number at some point in time? Your thoughts there would be helpful.

The market opportunity is massive. The customer and product-market fit for this product is excellent.

It is really serving a need, and there's no reason why this journey should be any different. The only thing that I would add to that is that it took us about 4.5, 5 years last time to get to those numbers.

Currently, we're tracking roughly twice as fast. I'm not saying that if it took us 5 years last year, it'll take us 2.5 years.

I'm not saying that. Currently, we're tracking twice as fast, as you would expect that we are ramping up this product.

This product is ramping up with old users, new users, everyone, just really, really well.

Very clear. Just last question before I jump in the queue.

Cash on the books, and thank you again for the color in the shareholder letter around cash in the books, very helpful. Is it to say that from a foreseeable future perspective, there are no large uses of cash either in terms of M&A or inorganic opportunity that you may look to deploy, and you're happy to have the cash build up in the books?

Your thoughts or color there would be helpful.

100%. Cash is the spine and strength.

I wish we had 40,000 crore cash.

I would just add one thing that compared to when this discussion started a year ago, not only do we have the 13,500 crores of cash, we are now also adding a significant amount of cash. I love the fact that we are a free cash flow generating business.

Actually, me and Madhur were discussing some days back and we see a stress in fintech ecosystem, because either you go public and then you learn the new reasons for feeling uncomfortable, or you in private round try to find out what is the reason for you to do what you want to do. I think people should get further stressed, further discounting, and that time the cash and the equity will be value.

Today, cash is way more value.

Manish, while we are adding cash to our balance sheet, we are also very actively looking for, within the existing perimeter of what we do, what are good ROI ideas. We have called out in the past that MTF has been a portion of our funds, very small percentage of our funds so far, which is giving us very good ROI.

Within our existing business, and I love that because it is a good ROI use of our cash and it also furthers our mission as a company in terms of serving our customers better. We are continuously looking for more opportunities within the business, mostly organic, maybe a few inorganic if there's the right opportunity at the right valuation.

Thank you. As always, great chatting with both of you.

Thanks, and all the best.

Thanks, Manish. Thank you.

Thanks, Manish. We will take the next question from Sachin Salgaonkar, followed by Vijit Jain from Citi.

Sachin, you may please go ahead.

Thanks, Anandita. Congrats, management, for a great set of numbers.

I have three questions. Let me go one by one.

First question: would love to get a bit more color in terms of how the loan book is moving, what is the mix between let's say a merchant loan and consumer loan, and any data points you could share in terms of merchant partners and how the growth is happening. The second part of the same question is, Vijay, you did mention about equity and wealth management scaling.

Any sense in terms of what is the mix today between lending and let's say wealth management, and how that mix could change in future?

Sachin, I'd say most of our profit is made from merchant side. Consumer side, we have, by the way, grown now quarter on quarter and the numbers which were flat or a little bit of flat and declining are significantly ramped up and we have crossed year-on-year number, like I told you, '24 number for even consumer credit, if you will.

The intent here is that we have done all of it mostly without requiring any FLDG. We sort of our distribution in the consumer side.

At the same point of time, the most of percentage is still 80-20 wise would be towards merchant side. Quality is good, that is why it is growing.

In fact, there is a much more interest from number of partners, but we remain committed to remain purely distribution company and we don't have interest to put a book on this business at all. We have queued small finance bank and I would say even the large banks are there now.

Couple of large banks have got activated. The partner-wise, we have more capital and I would say more capital meaning probably 4 to 6 times more capital than we are disbursing right now.

That is not a limiting factor. Then comes the percentage between wealth and this.

Oh, my intention is that when I say this is my focus area, I'm trying to say what I'm trying to rejuvenate to a sizable number. Wealth is not materially number in these two numbers if you were to ask me, and it is sizable, but not so sizable that I think we would start showing up.

The good thing is that it shows up as a subsidiary, people are able to see the P&L of that entity. It is there.

I do believe that there is an upside. MTF, we just found a secret in MTF.

We got money, we got equity capital, we got customers, the market needs it. There is a product-market fit.

Sachin, my intention, when I say I'm focusing, I probably am trying to discover the perfect product-market fit among every other person, and in wealth, we seem to are reaching that milestone. After that, four more quarters and then you will see sizable.

I just wanted to add one quick thing. You asked about number of lending partners.

I think you've heard me say that has been one of the key achievements last year in both the merchant loan and personal loan. We are now at double-digit number of partners, and the partners who have joined more recently are also ramping up very well.

We have really good legs for the next several years.

Got it. Thanks, both.

My second question is a follow-up on to your earlier answer in terms of margins. Now let's say the 8% margin goes to your 15% to 20% more like a medium-term target what you guys have mentioned, that itself is a sort of a sharp improvement in margins.

What we saw let's say this quarter, there was roughly 9 percentage point improvement led by indirect costs on a YoY basis on margins. The question out here is, what are the primary drivers of margins going ahead?

Is it continued reduction in indirect costs because of the scale benefits? Is it some AI-led benefits, and if so, could you help us quantify on what the magnitude could be?

Or is there a mix change which is driving those margins?

It's actually I think all of those are similar points. Look, at the core of it, we have a very fast-growing business with huge opportunities to expand, for example, penetration of financial services, not to mention improve unit economics of the payments business.

We have a very fast-growing top line, and our indirect cost, structurally there's operating leverage in the business, and AI makes it even better. What you would see is that indirect expenses as a percentage of revenues going down.

The underlying reason for that is that indirect expenses is growing at a very slow pace, whereas revenues is growing at a very fast pace. I should mention that we continue to invest in areas that matter.

Yeah. The cost of people has increased year-on-year.

Specially

the expansion of merchants, expansion of consumer business. Basically, AI is a distribution business.

Let me use this, Sachin, as a metaphor of my learning of AI business. AI meaning when you have your financial services business powered by AI, the differentiation will be how many customers do you have and what you do with them.

Customer quality, monetization ability, these are the factors that multiply once you add the power of AI. The gating condition of I would say harnessing power of AI is what distribution you are sitting at because nearly everybody could build what you build after some time, like always.

Here it is that we will continuously, and I'm using the word, aggressively continue to invest in consumer expansion, merchant expansion, and extension of financial services powered by AI stands for that our costs are dramatically optimized. One slide that I created and we put it in the tweet also, I think, where I said that our merchant distribution, in a way the small business merchant acquisition, is now governed by agent where the person is identifying what to disperse, our field sales executive must do.

This is all made in-house. I've started to find out use cases of this going to the third-party customers also.

Now you're seeing that we are flat practically if you do not look at the cost of, I'd say, sales people or marketing expense, then the organization is now flat or reducing cost quarter on quarter. Like I always said it.

I remember that I think couple of quarters back, it used to carry how much more saving you could see? I said this is always, this is continuously.

There's no quarter special that we are trying to do in this quarter. That, you would have seen the trend is continuing.

What we are saying is that there is a growth of revenue that is the magical part that we've started to show in the Q1 of this financial year onward. You're going to see the revenue ramp up, and that is why the margin growth is talking about.

Just to add, my sort of favorite set of metrics to pull together for this conversation to what Vijay said, is our marketing expense was up 27% year-on-year, our sales and service costing investment is up 27% year-on-year, and our EBITDA margin adjusted for PIDF went from 1% to 8%. We got a 7% EBITDA margin improvement not despite, but in addition to the fact that we continue to make as much investment as we think makes sense.

7 percentage point.

7 percentage points.

7%?

Oh, 7 percentage points. 700 bps.

My last question is, would love to actually understand your thoughts on UPI monetization. There are various media articles indicating that government might look to reconsider this, certain articles are mentioning about 5 to 7 bps kind of a take rate for larger merchants.

If such a scenario arises, what kind of an incremental opportunity we are thinking from a Paytm point of view, and would be great if you could help us quantify or any directional data points and how we could quantify the upside for Paytm.

I don't have any clue of actually the number that it could be or not, and what kind of line item it will be made for. We were trying to model it in-house ourselves based on newspaper and various other whisper in corridor, but we just said there's no materiality to it as a discussion when you don't know what the formula is.

We'll wait and watch, Sachin.

Vijay, just to reframe the question in slightly other words here. Today, if I'm not wrong, you guys are looking to monetize some of the larger merchants on your platform.

Would that materially change going ahead if this UPI monetization come? In other sense, is the upside meaningful to you guys if this comes up?

Sachin, hum chhote merchant ko bhi serve karte hain aur hamare materially large chhote merchant hain. Aur large enterprise including online hamare merchant hain.

Aur hamara UPI, MDR ke bare mein ek hi line hai: jo de uska bhi bhala, jo na de uska bhi bhala. Humne sabke upar monetization kar rakha hai.

Hamari zindagi materially change nahi hogi. Jo aayega, woh sab bottom line mein aa jayega, aur jo aa jayega, woh achha hi hoga.

Bas yeh hai ki business model mein uski obligation nahi hai, na PIDF ki obligation, na UPI incentive ki obligation, na MDR ki ichha, na MDR ki need. Jo aa jayega, sab bottom line pe aayega.

Isliye usko hata ke baat karte hain.

Great. Thank you, guys.

Cheers.

Thanks, Sachin. We will take the next question from Vijit Jain from Citi, followed by Pranav Kshatriya from Elara.

Vijit, go ahead, please. Mute.

Vijit,

can you unmute? Aapne mute kar rakha hai.

Haan, ab sahi hai.

Can you hear me now? Yeah.

Yes. Congratulations.

Great set of numbers here. I have three questions, one each on the consumer, merchant side, and then on AI.

Maybe on the merchant side first. In general, if you have merchants who've already upsold themselves into the financial services product or other products, so that relationship is stickier, right?

There's a line in your letter which I interpreted as that in certain cases with merchants you are reducing your subscription rentals. Shouldn't it be the other way around?

Merchant who are using more than one service are already sticky. Why would you reduce their subscription ARPU?

Vijit, ulta hai na? Jisse hum koi aur zyada ticket ka bada revenue line item bana rahe hain, toh yeh agar kisi cheez ko risk karta hai subscription ko, koi aake kya hi offer karega?

Sabse sasta le lo. Saste ko toh hum uda hi dete hain na price point se discussion mein.

Toh hamara toh paisa financial service mein aur zyada ban jata hai. Toh kyunki financial service mein aur zyada revenue ban jata hai, toh hum is subscription ko material na maante hue hum kehte hain ki yaar, hamari taraf se discounting.

Jisse ki uska merchant sign-up mein koi dusra koi bhi value differentiation na offer kar paaye commercially.

I see. Okay.

The second question on this was, so, in the letter you guys say that the net payment margins went from 8.8 bps last year to 8.4 bps, if this is excluding the PIDF incentives, right? Now, in general, I see you talking about tailwinds in online payments, then you have some of these other core payment margin tailwinds as well.

I'm just trying to understand is it basically just these lower device rentals YoY that would have contributed to this 8.8 going to 8.4?

Yeah. We've I think explained it in one of the questions in the back and you're absolutely right.

The payment processing margin, as we've discussed in the last few quarters, has been inching upwards gradually, but consistently every quarter. The impact that you're talking about is because of certain plans that we run for those merchants and highly engaged merchants.

I should point out that we have mentioned as well that we have tightened our revenue recognition policy on certain businesses a little bit. There was a slight impact of that, but most of it is the answer that we have given at the back of the document.

Got it. Vijit, bahut bahut important baat bol raha hoon.

As a business person main apne CFO ke bare mein ek line bolna chahta hoon. Madhur has literally made it, if you don't get money by the month end, this is not a revenue recognized.

Absolutely.

Absolutely. Everything else is a future upside if you get it.

Yeh

jo conservatism hai, yeh sab bhi aapko usme lag raha hai.

Good to hear, Vijay. Vijay, my next question is on consumer franchise.

Now you have Postpaid that is scaling up, you have consumer loans which is looking up versus last year, and MTF is doing well. You've applied for wallet license, and I'm guessing because you've said that last time wallet plus Postpaid will kick up Postpaid even further.

In general, how would you say your consumer franchise in terms of monetization is looking like in FY 2027? You have a guide 20 I think meaningfully better than 22% overall growth.

I know merchant business, for example, is doing better than that. In terms of the consumer franchise, what are we looking at this year, given all of these tailwinds in general?

I think bahut sa hoga. Matlab usme main kahoon kya?

Sab cheezon mein effort maar rahe hain, kuch na kuch toh chal hi jaayega. Itne saari missile aur rockets hain, koi toh chalenge.

I'll just add maybe one thing that there are certain consumer-side financial services which were slightly challenged because, as equity trading volumes went down a year ago until about 6 months ago. We were seeing headwinds in the personal loan business.

Of course, we didn't have much of Postpaid a couple of quarters ago. Now that these things are starting to turn around, we are start seeing significant upside on the consumer side.

When we look at our LTV to CAC, that is improving meaningfully, and obviously that is one of the reasons why we making some investments on the consumer side over and above product, we also invested a bit more in marketing.

Got it. My last question, on AI.

AI, I wanted to understand how is AI helping you on merchant acquisition, onboarding, collection efficiencies? Is it making it measurably faster, and so you're seeing better retention trends?

Any detail you can share on that. Second, also I see your cloud costs have come off YoY here, and I'm wondering if you were able to release some compute costs because you used AI or whatever else you used to figure out where you had scope for efficiencies.

Just a little bit of color on how you're using AI on the productivity side beyond employee costs would be helpful.

Vijay, first of all, thank you. Somebody saw what I wished somebody would have saw and asked.

You heard that people are token maxing means so much of cost. My whole year cost became out of cost in the quarter, that kind of situations.

We tune our own model, place on our own infra, and run it. You must have heard this popular make this phone call for let's say collection or revisit or retention, and so on.

Now, we took 200 billion parameter model, optimized it to 4 billion parameter model made for Indian languages, our own model, and then we place it on our own machine. Effectively, now you're talking about low latency, low cost of tokens, which is low inference cost, run and operated by us.

That makes our cost even lesser than the typical company would have costed for themselves.

We remove

the cost of call center,

we remove

the cost which otherwise you would have bought from outside, and we have optimized and added a skill to us. Now, this is the magic, and once we've done it, we will sell it to outside people.

Why will we not sell it? Actually, I'm super excited about the kind of new non-payment, non-financial services, I'm using the word as a description,

that

they are not related to payment, they're not related to finance services, and they are perfectly completely AI-in, AI-out services for our businesses and merchant partners. We've decided not to

do

AI for consumer as a all-in bet, but we definitely have decided that we will go to the merchants and the businesses with the solutions and services that we've created and we ourselves are the user of them. These things will show up as a new line item.

I'm glad that you looked at the compute cost. To the credit of Madhur, he will negotiate it so hard that they will invite him as a CEO Conclave elsewhere in the world.

This is the most efficient CFO. Madhur literally has become CFO Councils founding member where the CFOs who bother about cost and productivity, they probably have 4, 5 people only in the world.

Good to hear, and congratulations for that, Madhur. Just one follow-up on that and then I'll go back into the queue.

The non-payment, non-financial services you're talking about, these are AI services for smaller merchants, the

way that you've described? Enterprise also.

Sabko, chhote aur bade sabko.

I see.

Flipkart, Zomato, aur let's say offline retailer, merchant, sabke liye

hai.

Smaller businesses will take a different kind of service, larger ones will take a different kind of product.

Okay. Good to hear.

Thank you so much, and best of luck, you guys. Thank you.

Thanks, Vijay. We will take the next question from Pranav Kshatriya, followed by Rahul Jain from Dolat Capital.

Pranav, you may please go ahead. Hi.

Thanks for the opportunity. My first question is on the accelerating GMV trend.

23-odd percent in Q3, went to 27% in Q4, now 31%. Any cuts you can provide that what is driving it, because the letter actually says that offline is seeing strength, online is seeing strength.

If you can give what is growing faster related to each other? Secondly, in payment processing charges, are there any charges related to Postpaid also sitting there?

Because that saw reasonably sharp jump on a quarter-on-quarter basis in this quarter. Yeah.

On the first one, we are seeing acceleration in each of our payments businesses. Whether it is large merchants offline, small merchants offline, or online, they historically were growing at different paces.

As online business was also under embargo, so that is obviously headwind. Now the increase in growth has come in all of those businesses, including the consumer side, as Vijay mentioned.

Yes, there is an interchange that we have to pay in Paytm Postpaid, basis the network math, the credit line on UPI has, and some of that goes into payment processing cost. As you can imagine, some of the growth that we're seeing in revenue on payments is also coming from, for example, greater share of credit card processing, which also adds to payment processing cost.

Cool.

Can you talk a bit about how RuPay credit card on UPI is progressing, because we were seeing a very strong growth, but I don't really see any mention of that in the letter?

I think maybe you don't see a mention just because we have said it enough times that Paytm payment processing margin has been steadily going up because of mix, and one of the mix aspects is absolutely RuPay on UPI, which continues to see a good increase in adoption, small and large merchants both.

Okay. If I look at on the cost side, there has been 6.5% decline in the employee cost ex of sales cost, and this is despite the appraisal.

It seems like fairly sharp cut in the employee cost. How should we see this going forward?

Is this a baseline which is sustainable? Is there any ESOP cost timing sort of impacting that or any colors there would be helpful?

Nahi, nahi. Sabko sabko achha appraisal mila aur sabko ESOP bhi mile jo account for hue hain.

Aisa kuch nahi hai ki humne factor karke baad mein cost laga di ho. Humne kuch bhi exotic apne pe apply nahi karte.

Direct chaal straight forward, aur appraisal achhe hue hain, Pranav. Main yeh batana chahta hoon.

Woh toh rather yeh hai ki Madhur ne pehle se cut maare the.

There are minor situations that will exist quarter on quarter, but nothing specific to call out, nothing that is going to change our trend lines in any major way. We, like we have said, we do expect to continue to improve EBITDA profitability and pat.

The overall guidance on indirect expenses is that it will, despite the investments in sales and marketing, it will grow a lot slower than revenue.

Okay. One last follow-up on the first part, actually.

GMV growth acceleration, is this sort of sustainable from your point of view currently,

or

you think on a high base there can be some challenges?

Nahi, nahi. Sab kuch sustainable hai.

Iske do kaaran hain. Ek toh online wala factor in nahi hua, toh aapko lag raha hoga ki woh badhna baaki hai.

Aur offline mein digitization ka badhava ho raha hai aur consumer base apna aa raha hai. Toh teenon bucket jo GMV contribute karte hain, teenon mein apne product-market fit sahi hue hain aur kuch nahi.

Aisa kuch special trick nahi hai.

Thank you so much. Nice talking to you.

All the best for your next quarters.

Thanks, Pranav.

Thanks, Pranav. We will take the next question from Rahul Jain, followed by Jayant Kharote from Axis Capital.

Rahul, you may go ahead, please.

Yeah. Thanks for the opportunity.

Firstly, if I looked at the DLG data that we talked about finally for the month of June, it is now coming on a YoY growth trajectory. If you could tell us why this journey has been in such a manner where it scaled up pretty fast, then it kind of saw some moderation?

It appears it came from just one specific participant or partner, and then it's scaling up across portfolio. Any big-picture thought process you could share on the DLG side?

You should look at year-on-year GMV. I don't have a comment on the specific month.

I haven't, frankly, sort of dug into that specific month data. I think we have said in the note that I think in the context of revenue, but this applies to GMV as well, that it is very broad-based.

It is coming from every type of merchant category where we're seeing every type of payment category where we're seeing faster growth now than we saw a couple of quarters ago. It is not concentrated towards a few merchants or even one or two payments businesses.

Also, this specific comment that we made upon that we could reach upwards of 20% margin on a long-term basis, is it that we see that the indirect expenses could grow by 10% give or take on a long chart, and the ex of payment business can grow 70%, 80% incremental revenue into profitability, and we are seeing acceleration on growth, we could see that the next milestone once we achieve the 15% mark could be that we might guide up a bigger band like 20% to 25% kind of a thing? What make you come to that thought process right away?

I think away from specific numbers, what we're referring to there is that, first, the market opportunity remains massive, right? We still feel there's a huge amount to do not just in financial services, but actually in payments as well, right?

The long-term TAM for us is massive and as a result, I happen to think the terminal value of this business is fantastic. The second catalyst for saying that is because AI just makes you leaner as an organization.

Finally, your point about marketing services and financial services incremental revenue being very high on EBITDA margin, that is absolutely correct. Thank you for that observation.

Fair enough. That's it from me.

Thank you for the opportunity.

Thank you. Thanks, Rahul.

Thanks, Rahul. We will take the next question from Jayant Kharote, followed by Suraj Das.

In order to accommodate a few more questions, we will extend this call as well. Oh.

Jayant, you may go ahead.

Thanks, Anandita. Hi, Madhur.

Hi, Vijay. Congrats on a great set of numbers.

First question is actually around the industry and lending. Of course, merchant lending is a great product-market fit with the device and collections.

One thing that's been concerning a little bit to me is in the last one or two quarters, the disbursement by digital lenders in the personal loan space has mushroomed to around 25,000 to 30,000 crore a month, which means we're going to build 3 to 6 lakh crore of a high APR, 30%, 31% APR kind of a personal loan book at a systemic level in the next 12 months. Now, one concern I had was obviously regulatory, right?

If 5, 6 lakh crore of book is getting built up, there could be some sort of thought. Then the question is around merchant loan.

If the APRs in this product are to be moderated down to the better-quality merchants over the next couple of years, does that affect the profitability of this product? Of course, I want to know because the credit cost will also come down, right?

That may take care of some of that.

Second part ka I can tell that we already have started and proactively done different lower-APR products and we basically now do EDC devices where the merchant has more choices or more options or the pricing is pretty competitive. Just in case we do and internally we've gone all-stack.

As in we look at it merchant as now our strategic customer base where we don't see only one kind of product, but multiple buckets of products. The lower APR is not going to be surprise.

Rather, we will lead it to the market. If some competition walks into this space, we will just aggressively go and play lower-APR business, and whatever the logic will be just in case, and we are already doing it.

As far as consumer is concerned...

Yeah. I think on your first point, I don't have a specific comment on the top-down math that you shared.

I can just share with you what we hear from our lending partners. Like I mentioned, we have about double-digit number of lending partners in personal loans.

One is that they were very, very conservative for 8, 10, 12 quarters. As a result, there is actually a desire to do more unsecured lending today because perhaps as a percentage of their AUM, this number has come down quite a lot.

They are also seeing very healthy customer balance sheets when they're doing bureau and other scrubs. There is a desire to grow in this segment from various lenders.

The second is what Vijay alluded to earlier, which is that a personal loan business is distribution only. We don't do collections here, we don't FLDGs, and so on.

It really is helping lending partners find customers on our platform and distribute loans on our platform. Where we're seeing very healthy quarter-on-quarter growth now after 8 or 10 challenging quarters.

Great. I appreciate what Vijay said that we should be taking the lead in this rather than wait for the industry to do that.

That's great to hear. The second question is kind of a repetition of last quarter, Madhur.

Sorry to bring it up again. When the GMV growth of 31% not translating to net payment revenue growth which is at 25% when margins are expanding, again points out to the same thing is the subscription income lagging, right?

I do see a comment that you've called out. How should we think, because at some point this will start playing into the net payment revenue growth, right?

Because the margin expansion is there, but yeah, I wanted to know maybe from a 12 to 24 months perspective, at what point does this subscription rentals start kicking in?

I think you've got it right that net payment margin is payment processing margin plus subscription. On subscription, we have mentioned that in a few cases, in a few percentage of cases, we do these waivers for our merchants and also the tighter revenue recognition policy.

We do think overall, when we look at our merchant payments business plus the merchant loans, those payback periods are actually improving and overall that business is getting significantly more profitable as we move forward. I don't have a specific concern about how do we monetize our merchants.

In fact, our monetization over any period or cycle is very healthy, and this is despite PIDF going away. We feel very good about our payback periods.

The pace of deployment is not going to slow down anytime soon?

Yeah. We have said broadly 25 to 30 lakh additions a year.

We're very much within that band, and maybe additional investments could make that go even higher. Like I said, the TAM is massive and we have very high conviction on providing payment services to our merchants and especially small merchants, which is what we're talking about here.

That pace should continue.

Great. Great.

Congrats once again for a great setup.

Thank you.

Thanks, Jayant. We will take the next question from Suraj Das, followed by the last question for the day from Pranav from Bernstein.

Suraj, you may go ahead.

Yeah. Hi.

Thanks for the opportunity. I have two questions.

First one, if I look at the transaction breakup between merchant and non-merchant, the non-merchant piece is growing phenomenally well, I think almost 100% YoY versus if I look at your MTU growth, that is high single-digit steady and then robust, which means that the consumer on the P2P side in terms of transaction frequency that is increasing, right? Can you highlight what are the underlying drivers here?

Is it because of only the traction in the Postpaid or I don't know, is it because of bill payments or maybe campaigns like gold coins or something like that, which I am assuming that reflects here? Second part to this question is, hypothetically, let us say if your P2P growth is higher within the payment business versus P2M, over a period of time, the net payment margin should have ideally negative bias, right, because the P2P is a lower net payment margin business?

That is my question one.

I'll start the first. P2P is not a lower-payment-margin.

Actually, P2M is a lower-payment-margin, because in P2M government gives the incentive as a year end, and the last year's incentive has not even come, while in P2P you earn from originating bank and the bank link, and so on, forth. P2P actually is a revenue line item.

There is no wrong about this that P2P makes less money. For merchant, obviously P2M is the only revenue line item.

P2P is less revenue-making is not complete statement, or correct statement. You nicely looked at, we focus on retention.

In consumer business or internet business, retention is winning new customer. Ek achha customer naya customer laata hai.

We've all focused on instead of spraying, draining money in marketing, but rather making the customer who's with us feel delight and become more active user of Paytm. The usage is not by Postpaid.

Postpaid is not even 1,000 crore in a month. That's the say that.

We're talking about what number every day. Here it is.

It's not led by Postpaid. It is actually led by that we've simplified the app.

If you are user, if you are not, then please use the Paytm app.

Bahut

achha laga hoga. Naya wala app main khud hi use karta hoon, please use kariye.

Aur baaki sab log jo is call ko attend kar rahe hain, agar aap Paytm use nahi kar rahe toh agli baar hum ek QR denge. Aapko Zoom ki detail Paytm app se scan karke milegi.

Sabko Paytm karna padega. The intent here is that in my opinion, the ease and features that we sort of have nuanced brought out is giving us this growth.

Obviously, a new customer in terms of Gen Z is coming, and we sort of have the fancy of Gen Z customer as our customer base now, there it is.

Sure. Got it.

The last question is, in the financial services business, if I look at, you are adding let us say 1 to 2 lakh customers on a YoY basis, and if I look at the overall financial services segment revenue per customer, that is also growing. Question is, do you think this is sustainable and can be only one-way direction, or there are so many moving parts maybe in terms of product mix, unit economics, and hence commenting on the sustainability of one-way going up is a difficult task?

Bahut bahut base se bahut chhota number hai. Few lakhs, 1 million bhi nahi.

100 million ki janta ke upar, right? Abhi toh bahut zyada hai.

I would rather say that there is a huge upside, order of magnitude multiple, not percentage. It's rather the attention that we've started giving to it, whether you look at mutual fund distribution, which we don't count in this because that does not make material revenue, but then that person matures to equity brokerage, very useful.

Then similarly, credit, Postpaid, and then taking consumer loan, then insurance, then boom boom. I would rather say that I don't know how to say this.

The very fact that internally we are so excited and ready to say that we will grow profit margin and profit itself is because the customer base and the product-market fit and the business model has got scalable, and then head down, execute only that, and got all good.

Just to clarify, the 7.6 lakh number, we think that, barring any quarterly aberrations, this number should just linearly grow up. As we talk about revenue per financial services customer, if you look at the average revenue that we make today, obviously there's some products which are higher than that and some products which are lower than that.

Yes, there's a mix effect point which may affect us a couple of quarters here and there, but we are confident overall financial services revenue will grow. We were thinking about what are the metrics that we should put out there for financial services customer and financial services revenue.

Key financial services customers was one of them, and as close a proxy to saying here is what the number of customers who are taking a product and amount of money you're making per customer. Yes, within that, there will be some mix effect components.

Sure. Perfect.

Thanks. Thanks, Vijay.

Thanks, Madhur.

Thank you.

Thank you, Suraj. We will take the last question from Pranav.

Pranav, you may please go ahead.

Hey, good afternoon. Thanks for taking the question.

Just a couple of one. First one, I'll go back to the payments margin.

If I just look at your payments income as a percentage of GMV and also the payment processing cost, almost the entire drop in NPM seems to be explained by just the increase in payment processing charges from almost 10.6 basis points to 11.2. What's driving this sharp increase?

That's the first question. The second one is more on the consumer business.

The cloud and commerce or the marketing revenue is almost flat year-on-year. Could you give some color on that or at least if you take the broader consumer lens, how much is the revenue from consumer, be it FS or non-FS, really growing at?

Those would be my two questions. Thank you.

Right. On the first one, Pranav, I wouldn't quite look at payment processing cost as a percentage because there's a huge amount of very good non-bank linked UPI business to be done, and by very good, I only have one definition: does it make money?

If you end up increasing your credit card market share, for example, credit card processing market share, this number will go up, right, but so will revenue. That's why we point to payment processing margin.

Giving the exact number is slightly commercially sensitive, we give you kind of where we are directionally. I wouldn't quite look at it that way.

It is the case that number has gone up. Somebody asked whether it was because of Postpaid.

Marginally, but actually because we are doing quite well on non-UPI business overall. That would not really give you the type of conclusion you're trying to get.

On marketing services, we are seeing good momentum, partly because of we have more MTU, we have very good retention metrics, Vijay mentioned DAU is higher than it was in Jan '24, and so on. We are getting not only more customers, we're getting more engagement.

Another indicator is our MTU was up about 8%, but our consumer-side GTV was up 45%. That's another indicator for how much we have worked on engagement of customers.

All of that does translate with a slight lag into marketing services revenue as well as other consumer financial services revenue after all. This quarter we were slightly behind on one specific line item, which is travel, where there were headwinds.

When the ticket prices go up, usually leisure travel...

I think it was not headwind, it was head fire. Head fire.

When ticket prices go up, then obviously airlines overall business gets affected. Within that, leisure gets affected, which is vast majority of what our customers do on Paytm Travel.

That business was slightly behind our expectations, but for external factors. We are quite positive about marketing services overall going forward.

Okay. Marketing services, I understand there's the travel headwind, or head fire, but if you look at the broader consumer revenue, how is that growing?

Is it single digit, double-digit growth? What are we talking about here?

It is actually...

Where are we in the monetization of that?

You are accounting for every monetization, not just payment line item, but credit disbursement and wealth? Oh, then it should be definitely...

It is not far behind the merchant side. It is not night and day because we have talked elsewhere, just to pull together a few things that we have said in the document, which is that we are seeing tailwinds in the personal loan business, you can imagine that is now growing well.

Paytm Postpaid is contributing. Vijay talked about wealth earlier and we also talked about consumer P2P, which makes revenue.

There are various bits and pieces of this on the consumer side, which are giving us better LTV already.

Okay. It would be fair to say if you have an overall revenue growth of 20%, 30%, it's not completely skewed in favor of merchants.

It's somewhat comparable growth across both merchants and consumer?

I like the question because I want to tell you one thing: my personal role is to prune everything that drags down my company's growth. Either you give me growth or bottom line, everything else is thank you so much.

I think we may have anticipated this question because the first thing that we said on page one was broad-based accelerated growth in payments and financial services for merchant and consumer business.

Obviously, the nuance of the T words that we specified had to be specified, which

is great. I'm glad you're asking us to clarify.

Thank you. Those were my questions.

For everyone, I have a very interesting news that this time we picked up .md file, and as you can expect, this is not Madhur Deora file. This is .md markdown file, in an AI world as we call it.

This will allow you to just download and give it to your favorite chatbot, which is allowed in your business and company, and this is of everything: earning release, presentation, call transcript, obviously we will update that after this, and financial results. You basically have even all the information in single md file and you can talk to our agent that will be powering this soon.

Right now, do it yourself, download md and play with this. Till we meet again next time, here is thank you, everyone, for joining us.