One97 Communications Ltd, the parent company of Paytm, is scheduled to announce its earnings for the second quarter ended September 2024 (Q2FY25) on October 22. Investors keen on share market investment are closely watching the company's financial performance, particularly in light of its previous quarter's results.
Expected revenue drop and wider net loss in Q2FY25
According to market experts, Paytm's revenue from operations for Q2FY25 is expected to fall between ₹1,620 crore and ₹1,635 crore, marking a year-on-year decline of around 32-35%. Additionally, Paytm's net losses are projected to widen, ranging from ₹575 crore to ₹660 crore. This is a point of concern for those involved in share market investment, as the fintech company's losses have been a recurring theme since its listing.
Loan disbursements and GMV likely to improve
While Paytm is expected to report a year-on-year decline in revenue and an increase in net losses, its loan disbursements and gross merchandise value (GMV) are likely to show sequential improvement. The company's management had previously indicated that profitability and revenue should begin to see an uptick from Q2FY25 onwards due to better cost management practices.
This could bring some optimism for those involved in share market investment, particularly in the fintech sector.
Q1FY25 performance saw the company's biggest quarterly loss
In Q1FY25, Paytm posted its largest quarterly loss since going public in 2021. The company's consolidated net loss for the first quarter widened to ₹839 crore, a significant jump from the ₹357 crore loss reported in Q1FY24. Revenue from operations also fell by 36% during Q1, amounting to ₹1,502 crore, down from ₹2,342 crore in Q1FY24. The previous quarter's performance will serve as a reference point for share market investment analysts as they evaluate the company's Q2FY25 results.
Cost management plays a key role in improving metrics
During its Q1FY25 earnings call, Paytm emphasised its focus on improving operational metrics in the coming quarters. The company's management highlighted that improvements in gross merchandise value, merchant device additions, and cost management, particularly employee-related expenses, would begin to materialise from Q2FY25 onwards.
Share market investment participants will likely be looking at these factors closely in Paytm's Q2 results.
Regulatory issues continue to impact investor sentiment
One key issue that investors are expected to focus on during the Q2 earnings announcement is Paytm's management commentary around regulatory concerns. Earlier this year, the Reserve Bank of India (RBI) imposed restrictions on Paytm Payments Bank, barring it from accepting new deposits and conducting certain transactions with customer accounts.
The restrictions also affected services related to prepaid instruments, FASTags, and wallets. For those involved in share market investment, any updates on these regulatory challenges could influence their perception of Paytm's stock performance.
Share market investment outlook and Paytm's non-loan business expansion plans
Investors are also likely to pay attention to any expansion plans Paytm may have for its non-loan distribution businesses. Growth in these areas could potentially improve investor sentiment around the company's stock despite the expected decline in revenue and widened losses. Share market investment in fintech companies like Paytm often hinges on their ability to diversify revenue streams and manage costs effectively.
Paytm's share price performance ahead of Q2FY25 results
In the lead-up to the Q2 earnings announcement, Paytm shares have seen cautious trading activity. On the morning of October 20, Paytm's stock was down by 1.87%, trading at ₹712.4 per share on the National Stock Exchange (NSE). Over the past five trading sessions, the stock has gained less than 1%. However, Paytm's stock is up 12% year-to-date in 2024, though it has declined by 22% over the past year. This performance is likely to be of interest to those involved in share market investment as they weigh the company's long-term potential.
Final thoughts
As Paytm prepares to announce its Q2FY25 results, the focus will be on how the company has managed its revenue and profitability challenges. While year-on-year figures are expected to show declines in revenue and widened net losses, sequential improvements in loan disbursements and gross merchandise value may offer some respite. For those involved in share market investment, Paytm's ongoing efforts to manage costs and navigate regulatory challenges will be key factors to watch in the upcoming earnings report.
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