Paytm rides out collateral hit from gaming ban, bets on AI for growth

A government crackdown on real-money gaming dented Paytm’s profit last quarter, but the fintech major’s broader turnaround stayed on track. The company took a one-time ₹190 crore impairment on a loan to its gaming joint venture, First Games Technology Pvt. Ltd, but the underlying profitability and growth momentum held firm.

At the company's September quarter earnings call on Wednesday, founder and chief executive officer Vijay Shekhar Sharma said: “Our future growth and bottom-line expansion will come from India’s financial services business, replication of our product technology globally, and our AI stack—from infrastructure to use cases.”

With the regulatory clean-up largely behind it and artificial intelligence-led tools being rolled out across its merchant network, Paytm is refocusing on scalable, compliant, and higher-margin growth engines.

Paytm went through a series of regulatory setbacks, resulting in falling revenue, and large losses during 2023-2024, and has been on the path to recovery since. It clocked its first PAT positive quarter in the June quarter of this fiscal year.

Profit steady despite hit

For July-September, Paytm reported a 24% year-on-year growth in revenue to ₹2,061 crore, led by merchant subscriptions and loan distribution.

Net profit was at ₹21 crore, weighed down by the one-time ₹190 crore impairment on a loan to its gaming joint venture. Excluding the charge, the underlying profit after tax was ₹211 crore. (y-o-y comparison)

Payments remain Paytm’s backbone. Revenue from payment services, including other operating income, rose 25% y-o-y to ₹1,223 crore, while net payment revenue jumped 28% to ₹594 crore.

Merchant subscriptions hit an all-time high of 13.7 million, up by 2.5 million over the year. “Revenue growth was stronger than expected, partly because people are spending more on credit, so Paytm is making more money,” Piran Engineer, vice-president and research analyst at CLSA, told Mint.

In this festive season, people are spending more using credit instruments, and the use of EMIs and credit products has increased. Consumers are shifting from paying directly through bank accounts, which could be lower margin, to paying via credit lines or cards that have comparatively higher margins, and that mix change boosts Paytm’s revenue from the same user base.

Analysts said the company has significantly improved its net payment margin this quarter. “The mix of credit card and EMI may vary by quarter, but overall trends are positive. We’re also onboarding more online merchants, who typically have higher MDRs (merchant discount rates) and net margins,” said chief financial officer Madhur Deora.

The company's earnings before interest, taxes, depreciation, and amortization (Ebitda) rose to ₹142 crore during the reporting quarter, with the margin improving to 7%.

The company has approved an investment of up to ₹2,250 crore in its wholly-owned subsidiary Paytm Payments Services Ltd (PPSL) through a rights issue. This will be used to boost PPSL’s net worth, fund the acquisition of Paytm’s offline merchant payment business, support working capital, and reinforce its leadership in merchant payments. This move comes after PPSL recently received in-principle authorization from the Reserve Bank of India to operate as a payment aggregator.

The return of BNPL

After a year-long pause, Paytm has re-entered the BNPL (buy now, pay later) space with Postpaid, relaunched in September as a credit line on UPI (unified payments interface) in partnership with Suryoday Small Finance Bank.

The product was earlier paused due to industry-wide asset quality issues.

While the business hasn’t yet contributed meaningfully, analysts expect it to become a growth lever in the coming quarters. Overall, financial services distribution revenue jumped 63% y-o-y to ₹611 crore, led by merchant loans and stronger.

Sharma said the company aims to build up its financial services stack, adding Paytm Money, stockbroking, and other elements. “Over time, insurance will also become part of this stack. Over the next three years, we’ll explore replicating this model in other countries,” he added.

AI, a "big revenue driver”

With regulatory clean-up behind it, Paytm is now betting on artificial intelligence to drive the next phase of growth. The company has started deploying AI tools to improve cost-efficiency and is moving towards AI-driven product innovation.

“AI is a big revenue driver. Cost optimization happens anyway; AI adds acceleration and deeper opportunity. It enables entirely new products and services,” said Sharma.

Paytm plans to roll out AI-led infrastructure and tools across its merchant network within a year, with pilots already underway.