One97 Communications Limited (PAYTM) Earnings Call Transcript & Summary

Thank you for joining, and welcome to Paytm's earnings call to discuss our financial results for the quarter ending June 30, 2024. From Paytm's management, we have with us today, Mr. Vijay Shekhar Sharma, Founder and CEO; Mr. Madhur Deora, President and Group CFO; Mr. Anuj Mittal, Senior Vice President, Investor Relations. A few standard announcements before we begin. The information to be presented and discussed here should not be recorded, reproduced or distributed in any manner. Some statements made may be forward-looking in nature. Actual events may materially differ from those anticipated in such forward-looking statements. Finally, this earnings call is scheduled for 60 minutes. It will have opening remarks by the management followed by Q&A. [Operator Instructions] A replay of this earnings call and a transcript will be made available on the company website subsequently. With this, I would like to request Mr. Vijay Shekhar Sharma to kindly initiate the call. Thank you, and over to you, Vijay.

Hi, good evening, everyone. Thank you so much for joining. I'm very happy to tell you that in this evening, we have all come together in our office and joining from single place. That's why you're not seeing us, if you're looking at number of attendees in the call. And as you might have seen, our quarter performance has been in line with what we had suggested and what our operating metrices are showing the resilience and the capability of the Paytm product and sort of service resilience out there. I believe that this is just the beginning of the end of, I would say, the tough times or the numbers that have sort of stayed at a flat level from quarter-to-quarter. This quarter was the full impact of the situation that we got in and as a team and as a company, we all are committed completely to run it as a fully compliant business. My team and us are also committed to make sure that we go back to profitable quarters very, very soon. We are hoping and working on making sure that we deliver at least 1 profitable quarter in this financial year as soon as we are able to see a lot more clarity coming our way. As team, our focus is on going back to the payments and cross-selling financial services as a core business. Marketing services, where we help our merchant to expand and sell more to the consumers is a great opportunity. And we believe that we are able to deliver on that also. You must have seen the segmented numbers, and be happy to take the calls. In fact, just so that we all can take more Q&A. We've decided to do away with the early presentation that we give because more or less, we have already written the summary release that you all would have got it. So we'll right away start with the Q&A. So happy to take as many question and answers today that we are able to answer. Back to moderator for questions.

[Operator Instructions] First question is from Vijit Jain from Citi.

Vijay, just alluding to your opening remarks, when you said you're aiming to deliver on profitable quarter this fiscal year. Just wanted to understand if you're referring to operating breakeven or PAT level breakeven? And is the target to achieve that inclusive of UPI incentives. Just trying to get a sense on the roadmap from here to breakeven on -- in this fiscal year. That's my first question.

Thanks Vijit. Like you said it very, very well. We are moving off -- obviously, I do believe that last quarter where there will be a lump sum UPI incentive, hopefully, sizable again this year, we will definitely love to do -- that quarter should be profitable, but there is no doubt about it. We are looking at it without that extraordinary onetime item. So you can expect us to talk about EBITDA breakeven before the ESOP costs and before adding UPI incentive.

Vijay, my next question is in terms of the new user acquisitions for UPI, which you've not started since. And obviously, when you're able to do that, that should help you start to grow and claw back market share in UPI more meaningfully. I'm just trying to understand if there are any specific targets or roadmaps that have been set for you from NPCI before you can resume that? Is there any -- are there any defined milestones to achieve? Or is that more of you interacting with them? And getting approval from them to go ahead with that? That's my second question.

Vijit, we are in process of completing technology and consumer migration. As you are aware, we have done about merchant everything. And in consumer, there is a little bit of multibank ecosystem. So all banks have to participate. And then our primary partner, Yes Bank has to also expand on certain system's technology. So we are the last leg of nearly the tail end of the migration. So once the migration is complete, then we would go back to NPCI to request to add new incremental customers.

If I can just ask 1 last question. From the -- in the last earnings call, I think the April 2024 run rate for consumer and merchant loans was something like INR 20 billion a month. The full quarter number seems to suggest there's a moderation from April into May and June. So can you talk about the most recent consumer and merchant loan trends that you're seeing in June 2024. And any other thoughts on that.

So Vijit, on merchant loan, we had suggested that there is a pent-up demand, and we knew that this pent-up demand would mean that there is a little bit of surge as soon as we opened up. But in due course, if you look at it, there are more number of users whom I believe will come and our lending partners, thanks to the overarching credit environment, we'll get interest of our lenders. So I'd say that right now, we are not looking at very aggressive growth in credit disbursement thanks to our lenders, continuing to pursue a prudent according to how regulatory is suggesting policies. But at the same point of time, this also means the quality of credit, et cetera, for them is coming out to be great as they're seeing the data on their side on the books, et cetera. So core philosophy, I'd say that we remain very, very disciplined with our lender partners where we suggest them that they should be taking the decision which they want to take, and this is where we are. So net-net, we don't have much guidance to give, but that in due course, once the systems and technologies are back, as you know that right now, we are holding up in terms of new user or holding up in terms of incremental merchant, we have started adding that we have written. So I'd say that you can expect that in this current quarter and the next quarter, the number should get better, but we're not going to say that it is going to be dramatically better, all because that it is rather a larger macro and attention to the disciplined disbursement by our lender, which is a good thing, not because of any other reason.

Next question is from Adarsh.

Congrats. So the question is on first in expenses. You all have called out that there has been some one-off expenses in the indirect cost, except employees, everything is kind of up. So just wanted to understand what the road map here would be, right? If you add all of that up, it's INR 1,300-odd crores, up from about INR 1,200 crores last quarter. So if you can talk about what were the one-offs and what's the likely outcomes as you again ramp up some of the other businesses.

Thanks, Adarsh. So there are four main components of indirect expenses. The first one, the largest one is employee cost. And we had mentioned in the last quarter that there's going to be a tight focus on making the company a bit leaner. And as a part of that, our employee cost is down just about 10% quarter-on-quarter. We do expect it to go down over the next few quarters by another 5% to 7%. So on employee cost have good trend lines. On the second cost is marketing expenses. Again, we had mentioned in the last quarter that our marketing expenses last quarter was significantly lower than trend lines. This quarter, we have spent a little bit more than we would normally, and that was really -- we wanted to make sure we take this opportunity to inform all our customers and merchants that the services are working very smoothly without disruptions. And obviously, you may -- I hope for that you have seen some of our ads that talk about how we are now powered by 4 banks. So that was the big campaign that we did along with some BAU things. Going forward, I expect marketing costs in the rest of the year to be at a lower trajectory than what we did in this quarter on an average. The third cost is technology, software, what we call software cloud and data center. In that, we had some migration-related costs to third-party banks. So there were some one-offs there. also some of our contracts with our partners, with bank partners work in a way where we bear some of the infra costs, but we do get a slightly higher share of UPI incentives. So that is something where the contract is just slightly different than the contracts that we had in the past. And finally, on other indirect expenses, we had some one-off provisions, largely related to our device merchants. We took this opportunity to look at our provisioning policy, and we have taken a very conservative provisioning policy on any trade receivables, particularly from device merchants. And any time you tighten provisions, you usually have a one-off expense and then you have that sort of taper down. I do expect the other indirect expenses to also come down very meaningfully starting next quarter. So that's where we are. So yes, you're right, that despite the decrease in employee expenses, our overall other indirect expenses went down -- went up from INR 1,200 crores to INR 1,300 crores, but we expect that to come down. Overall, one-off numbers would have been to the tune of about INR 80 crores to INR 100 crores in this quarter.

The other question that I had was on the lending side, what is your -- you did mention that you should see a gradual scale-up. Just wanted to know if you can break that up between merchants and PL, what kind of grading up should one expect in due course.

I think both of them have very different trajectories in some ways. The Merchant Cash Advance business, we've been running for 4 years, and it has been absolutely rock solid throughout. In fact, from what Vijay mentioned with respect to even further tightening and sort of credit policy discipline and so on, we are seeing some very good signs in terms of early buckets. So this business has always been a fantastic business for our partners and a fantastic business for us, and that continues. It's really just a question of in this sort of credit environment. It'd be better -- we're just better save and sorry sort of situation, we just remain conservative. On PL, as you know from the last quarter discussions that we are focusing largely on distribution of personal loans and their efforts are underway to add more and more partners, both banks and nonbanks. And as you have more partners, we should see more and more scale up -- and I think the key focus there is to build as much -- one of the focus is to build as much diversification. So we shouldn't -- both of these businesses should grow like Vijay mentioned, but sort of for different reasons.

And my last question, Vijay, is on the devices. Your commentary says you get back to adding a lot of devices that you used to in '24, which was about 13 lakhs, 14 lakhs a quarter. So is that the run rate that you're talking about once you get into the second half?

Well, I don't know, whether it will be 13 lakhs, 14 lakhs per quarter or less or more, but I can tell you that what we are seeing is that as far as our understanding of the market is concerned, there were a lot of devices that had got inactive, and we used to pick them, that is why we net them and we are finding that we could pick those devices and deploy them back. That is why one of the big reasons that our CapEx will be lower, but we will be able to get more money also. So when you say 13 lakhs, I think healthy number would be more like 1 billion a quarter instead of 13 lakh, 14 lakh but who knows, we could just, in a festive quarter aggressively go there.

So yes, no or I meant is you get back to like a 8 lakh, 10 lakh in due quarter.

[Foreign Language]

Next question is from Lokesh Manik of Vallum Capital.

Just a couple of questions from my end. One is on the technology. So sometime back I had warned that our uptime is quite high compared to the competitors and I understanding one of the reasons is that we have now announced [indiscernible] Paytm Payment Bank. Now that the payment system is being powered by 4 different banks, do you see any payment the uptime? First question.

A short answer that we are adding our technology to the partner banks. We are powering our partner banks with our technology.

Understood. And the second question was on the divestment of the entertainment business. So should we expect the software and data...

Should we expect -- clarify again?

Do we expect fall in software and cloud and data center cost?

I hear what you're saying. So let me tell you the biggest cost in software and data center is actually order of magnitude bigger from payment processing or payment pipe. I mean total number of transaction as you can guess, the computing is in reference to the number of queries that we'll send to the cloud. Total transactions for all of our -- these various marketing services will still be less than 5% of total cloud cost. So it won't be at all material even if we look at one category of line item over other. Because rather largest cost goes in a number of payment processing that we execute at the back end.

Next question is from Pranav Gundlapalle from Bernstein.

A couple of quick questions. The first is on your payments margin, just the processing margin. There's obviously a sharp decline versus, say, the December quarter. What are the biggest drivers apart from the loss of certain products? Are there any other factors driving this decline?

So primarily -- I think we've given some details in the last quarter earnings as well, Pranav. So I'll just refer to that, but just to answer your question. Most of this decline is due to the higher profitability that we had from the products that were discontinued, particularly wallet. So we had mentioned that we expect the non-UPI to be, again, 15 to 18 basis points as it was a couple of years ago, actually, but from -- so that was one of the component. The second is, again, in the -- in our deal with third-party banks such as Yes Bank and HDFC Bank and Axis Bank and so on, our commercials are slightly different in the sense that we do bear a little bit more of payments costs, but we get a slightly higher share of UPI incentives. So on an overall basis, we do about the same, but the running costs are a bit higher. And we have given some mix numbers as well that we expect this to be 3 to 3.5 bps a quarter. but excluding UPI incentive and including UPI incentive, we expect that to be 5 basis points plus.

So the 4Q UPI incentive would be much higher now. And therefore, the full year gap would be a lot lesser than the gap we are seeing in the individual quarters. Is that fair to say?

Yes. I think there is an offset there. But again, we were earlier at between 7 to 9 bps. And I think in last quarter earnings, we did say that we'll be between 5 and 6 bps going forward.

Next question is from Rahul Jain of Dolat Capital.

Since that you have not shared any specific guidance for Q2. It would be still great understand some [indiscernible] color in case how are we trending in recent months versus, let's say, quarterly average, maybe in terms of ARPU, in devices [indiscernible].

Rahul, as far as device revenue per device, et cetera, are concerned, like we were told, you could see the revenue, and that's the very much in line. So what other line item ARPU we should be talking, considering that what we do not have, we have indexed it, if you notice, from January, the GMV or the transaction volume net of what product that we cannot carry namely the products that we cannot carry I want to remind you on wallet, rent payment, and in last month, credit card bill payment, BBPS and direct connectivity was in India resetted that you cannot take that directly. So quoting ARPU, obviously, beyond these products, ARPUs are in the same range. In fact, rather what we are seeing and what able to do is that we are able to increase ARPU per customer, whether it is customer or merchant side, we are able to do better cross-sell. So internal company has been aligned in a cross-sell method mode that there should be an attention to cross-sell in a more attentive ways. So expect ARPU of net of those products stable and then adding the various line items and the increase in ARPU in the next few quarters.

So the second question was to understand what are the thought process behind, there was this belief that [indiscernible] some part of the market related to events? And we'll be improving better focus and eventually from a time perspective, given that some product has been [indiscernible] later on. What is the broader thought and is it more about very sharp on fewer things at this point and those expansion can be much later [indiscernible].

Rahul, one thing that I personally take care, and I'm putting every line item of business under review is that if it takes attention and resources and if it does not contribute towards the bottom line in a growing bottom line manner, then why are looking at it, that's a simple approach.

So I think -- I'll just add to that. We want to focus very sharply on places where their ecosystem benefits to us, payments clearly being the core business of us and then there's financial services. And if you look at what we call marketing services, those are areas where we basically have payments merchants who we can do more and more business with. So that is one filter that we use. The second filter that we use, as Vijay said, is sort of what is the contribution to the ARPU our overall business. And the third is what are the avenues available for us for maximizing shareholder value. So basis all of these certain businesses are evaluated from time to time. And this is an evaluation that we are doing right now.

[Technical Difficulty].

Rahul, your network is not perfect. We are able to...

It's tough to understand the question. So maybe a little louder or the or something has to be done.

Is it any better?

Yes, definitely.

Yes, yes. So just last bit, in terms of understanding the right growth metrics for us now, the challenges are behind. Now we have the [indiscernible] run rate that we see that at a stable point. And here on, we would grow over time. So is there a way you want to characterize that given the current shape of the business and product that we have [indiscernible].

Rahul, if I've understood, and I'm answering so that if there is something doesn't get answered, please do revert back. Overall, we have shown the stability. And like we are talking, our merchant base growth is expected because we are already onboarding merchants. While on consumer side, we are awaiting onboarding. So 1 is that is a TAM, total addressable market of cross-sell to be enhanced on our platform, which is the number of users or merchants, which is the total addressable customer base on the platform, number one growth metric is this. And number two, because we have had and we are lucky to have such a resilient customer base or trusted customer base on our platform where it's more than enough for monetization to be honest about it. We believe that we need to cross-sell various financial services and help merchants get various marketing services better. And that is the key KPI that we need to look at. So more customers and more cross-sell per customer as simple as that. And among the cross-sell, obviously, one of them that we've done over the past, and we still continue to do is credit while insurance and wealth are pending at a scale. And in marketing services, we've shown what we can enable to the merchants, and we have a few more line items that we are expanding and have seen those line items ongoing with merchants. So more merchants and consumers, basically more customers on our platform and more cross-sell per customer.

Next Question is from Bhavik Dave of Nippon Mutual Fund.

Sir, 2 questions. One is when we look at our employee expense decline that we've seen quarter-on-quarter basis, it roughly looks like 50% of the fall has come from your 5,000-odd fleet on street that have gone off and the remaining is from your other employees. I just wanted to understand, when you talk about 8 to 10 lakh odd merchants that we'll add like maybe from the festive quarter onwards when things normalize, will we require -- will we be okay with the 30,000, 31,000 odd people that we have fleet on street or we'll have to maybe pull that up back. How do you think about it? Because that's visibly contributed to your employee expense going down. So just wanted to get your sense on that.

Bhavik, we had a FastTag sales team, and we have optimized on that side. While our merchant sales team continues to be augmented, you will see increase.

Okay. So this number will be around this 31,000 to 35,000 odd people.

Expect continuous growth and at festive season, all being good, we will be bigger in this count.

Okay. And sir, second question is on the -- in other indirect expenses, which Madhur sir alluded to, when there's a INR 75 crores, INR 80-odd crores kind of increase. I didn't get the -- I didn't get the entirety of the answer. In the sense what exactly is this INR 75 crores INR 80 crores? And that seems to be the one-off for the quarter, right, like in terms of increase in indirect expenses. If you could just throw a little more light on that.

Look pressure was overall in indirect expenses, not just on other indirect expenses. So what I was saying is that if you just had to look at one-offs, then there are some interest expenses that we have incurred as a part of the transition. And the second is that we have tightened our provisioning for aged receivables, specifically for device merchants. And the one-off nature of the second point is that any time you tighten the provisions, there is a one-off number. And then obviously, there's an ongoing number.

Next question is from of Jayant Kharote of Jefferies.

Congrats on a good set of numbers. Vijay, I have 3 questions. Firstly, I wanted to start with now that operations have stabilized, your lending pipelines are laid out and as you said, you are going to grow in tandem with how the market landscape moves. So now where do you see the new growth avenues or profitability avenues from a near term, let's say, 3, 4, 5 quarters outlook, which are the products or segments which frankly is making you most excited? That's the first question.

Jayant, there is no doubt about it that in India, commerce is not a bottom line centric line item, and we've seen that any kind of commerce is not going to be significantly bottom line accrued. So the other line items are advertising and you can talk about financial services. So credit, insurance and wealth in this sequencing as a dollar value, total value basis is what my personal pick would be and advertising is a byproduct of traffic. And all these are bottom line accretive.

Great, that really helps credit insurance and wealth. So just on building on that, firstly, credit, do you see credit card on UPI? What is the stumbling block? Why haven't we seen that volume? It did have an initial pickup last year, but where is that momentum not heading? I mean -- what do you ascribe that to?

UPI requires RuPay credit card. RuPay credit card requires new credit card to be issue. New credit card issuance requires market to improve. Market improvement requires rates to improve. So you can see the domino where it is headed and effectively as soon as you see more and more RuPay credit cards in the market. So that's why banks are now replacing, if you will, or issuing the same limit on RuPay credit card instead of calling them incremental because of you in [indiscernible] world will be seeking credit card portfolio. So that increase is what is now secular, organic, not catapulting to a very extraordinary number is the reason that growth doesn't look so much. But at the same point in time, overall credit card on UPI is a great product, very visible and it is only for RuPay credit cards, that is why it is where it is.

Bhavesh had given this number 2 years out, he was looking at a 5% of GMV sort of coming from this product. Do you think we are still on track to do something like that in the next 1 or 2 years?

I think I'd add credit card on UPI plus credit on UPI into this because maybe the credit on UPI is what NPCI is very actively working upon. So that would bring effectively the app or acquiring site roles remain anything that bears MDRs and MDR on both are very similar. So in other words, I would still be saying the same. And I would just add a credit card or credit on UPI, because maybe people don't issue or the banks don't issue credit card as much they can issue the overdraft limits.

Great and one last question on the insurance side some of our peers have scaled up this 2-wheeler consumer products of insurance very successfully now. Why are we focusing on the merchant side and not doing both ends, consumer and merchant? What is the thought process over there?

Merchant is more in-person sales that we are able to execute that doesn't require social media or other marketing channel to be required. So there is -- actually our merchant side number is bigger than -- on a revenue line item, merchant number is bigger than consumer actually.

And in the near term, there's no thought process of doing consumer side from your end?

No, no, we'll do it. I mean health is something that we are trying and we are seeing good product buildup. So we will and we are. Like I told you, in sequencing, credit insurance and wealth as a dollar value increase while wealth is maturer product for us, so we would do more wealth. And insurance-wise, like I said it we are now building towards more consumer side and bringing that as an attention point.

Next question is from Grishma Shah of Envision Capital.

Just wanted to know your thoughts. Partly, you addressed it, but if you look at the payment to consumer line item, INR 84 crores of revenue this quarter, roughly. We don't have wallets. We don't have FastTag. Postpaid loans may or -- may come back in the future. So while we understand that you want to cross-sell, you're waiting for approvals to bring in more consumers here. Very tough true estimates, when will the wallet piece come back? So if you could give some idea on that.

Mam, First of all, you very well have zoomed in, and these are the factors. I would rather add and correct a few more factors. So consumer payments, number one wallet; number two, rent payment; and number three, like you said, postpaid loans, which were interchange revenue, right? These 3 are the bigger consumer side of the products. When can the wallet come back? We're very hopeful that it should someday in partnership or otherwise come back. At the same point in time right now, we rather our focus on products before that, like stabilizing relationship with banks on UPI technology like an earlier question I answered, and at the same point, I'm stabilizing and bringing back the merchant back. So are we working on the wallet to be brought back or are we working on other systems to be working and scaling? We are right now working on the systems to working at scaling. And we will this come back? We hope and wish that it should come back. But we don't have action towards it.

Okay. And approval from the NPCI should come during this fiscal?

On consumer adding?

Yes. sir.

We definitely believe that it should definitely at a fiscal scale, definitely, unless until something extraordinary is awkward.

Next question from Aashi Anand.

I actually had a question it'll be an extension of Grishma. If we look at the consumer payments GMV ex the discontinued products, this is down about 20% from an index perspective. However, consumer payments revenues are down 80%. I just want to understand, can all of this be ascribed to higher profitability on the 2 or 3 products that have been discontinued? Or are there any other factors at play?

You very well said it already that the products that were discontinued were very highly profitable.

We have repeat questions from Vijit Jain.

Sir, just 2 questions. One, I just wanted to get a sense of -- you've obviously telegraphed that you look to cut INR 400 crores to INR 500 crores in annualized employee expenses, and you have pretty much done that in this quarter, if I look at December versus June quarter. So is it fair to say that most of the actions that you needed to do on the team side are now behind and you would look to grow team in line with how the product evolves from here?

Vijit, I would add one extra line item here that the total impact that can be visible in finances is actually, as you can understand, there are notice periods, et cetera, et cetera. So that is yet to come a little bit more.

And Vijay my last question, with the devices thing, you and Madhur mentioned about the age receivables impact because of some devices which went inactive and then you redeployed them. So I'm just trying to understand, during this whole last 6 months, you would have had some merchants drop off from devices. Were you able to recover most of these devices from merchants who dropped off and redeployed them or were there some devices that you would also have had to write-off?

So Vijit, normally, what we do is we have reactivation efforts, right? So obviously, when a merchant becomes inactive, your first few months of efforts is to reactivate them as opposed to pick up the devices. If only a merchant is inactive for longer that we would look to pick up the device and refurb it and redeploy it. And even that is worth doing. But obviously, from an ROI standpoint, it's much better to try to reactivate the merchant. Also, because this inactive -- the merchants that went inactive was due to an external factor. It's not like the merchant's behavior changed or something. It's just that maybe they saw some press news or whatever else and got confused and thought their device will stop working. And that's the reason they went inactive. So our effort should be actually even more on reactivation in this case because the merchant may not have just voluntary one day chose not to use the device. So we will move towards a period of reactivation period and reactivation efforts and only after that, think about picking up these devices unless the merchant has expressed a specific desire to not continue. And I think our -- on the other hand, from a financial standpoint, we want to be conservative, right, which is why we have increased the provisioning because in a situation where if I'm not able to -- if I have some money due from a merchant and the merchant has stayed inactive, then I want to get that off the books.

Next question is from Nemish Shah of Emkay.

So I had one question on the devices front, if you could just call out what would be the subscription revenue per month per device for us this quarter.

So on a device space, we get about INR 80 to INR 90 per month per device.

And what would be the CapEx guidance, if you have any for this year?

We are actually working through that for this year. The reason is tied back to the question that Vijit had asked that if you have inactive devices, at some point you would be picking up a percentage of those and refurbing them and redeploying them. But it's safe to say that our CapEx this year will be lower than our CapEx next year quite meaningfully -- sorry, sorry, our CapEx this year will be lower than our CapEx last year, meaningfully lower than our CapEx last year.

Next question is from Manish Shukla of Axis Capital.

On personal loan, just curious, why is the ticket size flat Y-o-Y if we had stopped doing the small ticket personal loans for the last 6, 9 months?

Why is the ticket size?

Flat on a Y-o-Y basis. The personal loan average ticket size disbursement, I would have expected that would have trended higher, given that you stopped doing small ticket personal loans for more than 6 months.

Actually, the percentage of small ticket personal loan was quite small. I think from what I remember, in December -- early December when we had spoken about this, I think by volume -- sorry, by value, I want to say it was high single digits or low double digits, 10% or 12% is my recollection -- sorry, but I think maybe by volume, it was 10% to 12% by value, I think it was closer to 5%. So it wouldn't really change the number very much, Manish, and the rest of it could be variance of the remaining 95%.

Okay. One of the notes to account is that FVTOCI is all PayPay. So what is the carrying value of PayPay investments as of end June?

I should -- I can get that to you separately. I don't have that offhand. But yes, all of that is related to PayPay. And just to clarify, it is related to ForEx movement. So this quarter, we have not had any change to the underlying value. It is basically ForEx movements between yen and rupee and I think yen has depreciated slightly against the rupee.

Yes, but we don't have the balance sheet, so we don't know the number for 31st March as well, right, so?

So I'll get you that number for 31st March. I'll have put that is put that out.

Sure. And last question on personal loan disbursement. I joined the call, so my apologies if this has been answered. The monthly run rate in March and April was INR 1,000 crore plus. But this quarter on a full quarter basis, we've done about INR 2,500 crores. So what are the numbers that we are looking at going forward?

Personal loans going through 2 of the buckets as you discussed last time, that we are only going through disbursement of large-ticket loans, which is only like we just learned 90%, 95% of them were earlier the large ticket only. But the intention is to define these loans as disbursement only where our role responsibility is not led by collections. So now these loans are susceptible or obligately linked to the wider credit situation or context of the market. So until the time period market or regulatory guidance as to the small credit or these are the -- these still are counted as small credit, even though not less than INR 50,000 goes up back, this is not going to grow very dramatically.

So Manish, I just wanted to add to your previous question. In October and November of last year, October, November 2023. We had disclosed previously that personal loan less than INR 50,000 was 3% to 5% of dispersal. So it was already a fairly small percentage. We have been reducing lower ticket through 2023 as well. So at the beginning of 2023, that number is closer to 7% to 9%. So most of the change that you have seen was already more than a year ago. And the carrying value for PayPay is roughly -- for our stock acquisition right in PayPay, it's roughly INR 2,000 crores.

Sorry, INR 2,000 crores.

INR 2,000 crores.

Next question is from Sumeet Kariwala of Morgan Stanley.

Great to see the business stabilized now. As we do that, I had a question from a medium-term perspective. If you can highlight what would be the sustainable growth rate from a 2, 3-year perspective where the contribution margins and EBITDA margins kind of stabilize from a 2, 3-year perspective, nothing for fiscal '25, '26, but if we take a 2, 3-year outlook, how should we think about the business now post all the changes.

Well, Sumeet, first of all, thank you so much. We believe that it should be growing very comfortably now that the base would become smaller. If you noticed that we were able to do very healthy 35-plus percent growth any which ways on a larger base. So you can build it or we can at least expect bettering that number?

So Sumeet, I'll just add, I think if you think about the payments business, the GMV growth is very strong and especially on merchant side. Our position is very strong. And before these events, we were actually growing market share quite meaningfully. So while we have had some reduction in market share from call it February to May, there's no reason why we should not be on an increasing market share trajectory as well. So I feel pretty good about, obviously, the overall payment volumes in India, been growing 30%, 40%, 45% comfortably and then our merchant side share increasing as well. So that's on the payment side. On loan distribution, obviously, one has to be very, very, very cautious through the cycles as we have been. But even if you had to sort of put aside any recovery-related tailwinds. Again, growing loan distribution business, given how low our penetration is, by 30% to 40% is the sort of thing that we should be aiming for. I think, Vijay, in the document we have talked about in our key focus areas also insurance and wealth, which are not massive contributors to our business right now. I think together, they are probably about 3% to 4% revenue -- of our overall revenue. But the reason why we're talking about those is there are places where we are allocating resources not from an FY '25 perspective, but really from sort of future growth drivers perspective. So we think that they can add percentages to our top line. In terms of margins. Obviously, we are currently now on a path back to recovery to profitability and Vijay talked about at the beginning of the call. Medium term, we do want to get to sort of high double digits or close to 20% EBITDA margin and I think the overall platform can do much better than that. But over the next -- if you have to say over the next 3 or 4 years, that's what we should be aiming for.

Yes. And just one small follow-up. Broadly, this 15%, 20% range should be a fiscal '27 kind of event? I know there's -- I'm asking a tough one, but just trying to think whether it's fiscal '27, '28, '29 or in a sense because things are stabilizing now, fiscal '26 and fiscal '27, if they're good fiscal '27 could be that kind of a year or it's further out?

Yes, fiscal '27 and fiscal '28, those are the ranges we should be in. And I think longer term, we can be higher.

Next question is from [ Aman Vij ]

My first question is, so basically on the merchants the penetration of the devices. So this number used to be around 10%, which has now moved around 25%. So could you talk about how much higher can this number grow to.

Sorry? Of overall merchant-based penetration was 10%, is that what you're saying?

Yes, it was 10% 2 years back. Now it is around 25%, right? Out of 4 crore we have 1 crore devices 4 crore merchants.

So obviously, right now, there is no doubt about it that we were redeploying or capturing the current merchant base, visiting them and then when you revisit, then you find out that they are a Soundbox customer. So you're looking at it. At the same point of time, there are both numbers increasing. The overall TAM of number of merchants, which are paper QR and the number of merchants that are Soundbox. And I think that now there is a new trend in India that the new shop is happy to take Soundbox day 1. So in other words, we would be able to get subscription paying merchant from the day 1 instead of earlier where they used to have a QR code-based transaction volume and then graduate to Soundbox. So this percentage is not the funnel mathematics. Basically, Aman, I'm trying to say. We basically -- we could be deploying hundreds of thousands of merchants, which are first timer on creating platform with directly device.

So the question is a little long term, say, 1 to 2 years down the line. Do you think this number, which is 25% now, can it move to even 30% to 40% because like you're saying...

It rather should be 100%.

Yes, the incremental will be 100%, but overall out of...

I mean, overall, like I said it that any which ways, the number of merchants that take payment using Soundbox become higher transacting merchants and so on. So we prefer to onboard merchants or transformers into Soundbox. So I mean this penetration percentage, we don't look at it like that. And like I told you why because we rather believe there's merchant who is paying a subscription is a better merchant.

Makes sense, sir. Next question is on the Soundbox part only. So could you talk about in terms of whatever is your estimate? What is our estimate in this product? Because we were the first in this product but now competitor is also catching up. So according to your estimate, what is our current market share in this soundbox product?

I don't know. There's no numbers from market. I mean there is nobody who captures total soundbox deployment.

Sure. And for our mix in terms of the POS machines and Soundbox, is it still more towards Soundbox or has the shift moved towards the POS machines.

As you said, we have pioneers of Soundbox. We will expand on Soundbox and add card to that instead of making EDC pickup a Soundbox, what I'm saying.

Makes sense, sir. So just 1, 2 clarification. So the number which you mentioned, [ 7.8 crores ] monthly transaction user. Does it include the merchants as well as the users.

No. We basically -- I mean, total customer on the platform should be A plus B and minus of the [indiscernible].

Sorry, I didn't get it.

Merchant plus consumer plus certain people who are both that. So the number does not include like that.

Okay. So no double counting, but it includes the number of merchants we have as a transacting user?

No, it does not include those people as in this number. I'm rather saying the total number of platform user will be consumer plus merchant minus certain consumers who are both merchant and consumers. And the 80% is only one side of the not both side numbers. Aman the point I'm trying to put up is that we are not talking active merchants into our active consumer count. We call it consumer not customer, while customer on the platform is consumer plus merchant.

Okay. That makes sense. Final question I had, you had talked about we have focused more on merchant loan basically. So in terms of the -- so there's 2 parts payments and the loan distribution side. Again, the question is on the market share, in your understanding, what would be our market share in this merchant loan payment systems?

Sorry, can you please repeat...

Again Aman, we do not know of who else do it or how much they do it, and banks directly do it and other NBFCs do it. So we can't say a market share of merchant loan to merchant. You know what I'm trying to say? There is no unit -- again, these is no denominators, which we know of to the numerator of our numbers.

So just to be clear on this, you want to stick to sort of published information and some of the questions that you're asking, we don't really have published information on. And like you said, we think we are pioneers of this product and we make high commission on this product. So we just continue to expand the market. And there have been interesting learnings along the way that saying that earlier merchants were waiting from QR to Soundbox not as much as on Soundbox perhaps the first payment product and so on. So that's the bottom-up opportunity that we see and feedback that we execute on. We don't really have -- there might be research out there, but we don't really have market share information to share.

We will take only 2 questions, I mean 2 participants after this. We'll start with [ Deepak Mendiratta ].

I've a very small doubt. I'm not sure if it has been covered, how do you see the sustainable take rate on the financial instrument on the financial lending side? And apologies if it was called earlier.

I think we have mentioned in the last earnings release that it's 3% to 3.5% on the spot. You don't know what -- I just clarify, you're talking about take rates on loans, right?

Next question is from Nitin Aggarwal of Motilal Oswal.

I have 2 questions. One is a first, if you can talk about how has been the success rate and reactivation of dormant UPI customers? Because we have lost a fair bit of customers over these months. And so do you really see any room to increase NPUs until we are allowed to onboard new customers?

There is a little bit of month-on-month increase but not material enough. There is, yes, Nitin, a short answer, there is. And by the way, the total TAM of people whom we could bring back is about 183 million.

And how has been the success rate in like so far on your engagement with the customers of this 183 million, therefore, what is your sense?

I mean, overall, if you remember last time, I was saying that we were interested in materially valuable customers. So materially valuable customers are those who can remonetize and so on and so forth. And we are also augmenting our product. As you are aware, that right now the product back end is something that we are working with banks. So we have not gone aggressive basically. Short answer is that, because multibank partnership, workflows, lots of things.

And just a take rate guidance that you have suggested, 3%, 3.5%. So -- but at the same time, you're also looking to expand into the secured lending products. So any like specific plans as to which all products you will want to initiate with the lenders? And what size you're looking at when you look at this take rate guidance over the coming years?

I think take rate guidance on loan is, as you are very well understood that it is dependent on the product mix. It is not like a disbursement mix. And if our disbursement of secured credit, namely LAP, loan against property, or loan against gold, or loan against securities, all those kind of things happen, then the numbers will be different. So have we seen those numbers yet coming in. So these are in integration process. And we'll see as this comes. And like you said it very well, the take rate is an outcome of the kind of mix of product that we're talking. And right now, the mix stays the same. So that is why we are talking the same take rate. But like you said it, if we end up growing secured credit dramatically bigger in ratio, it will show those kind of numbers.

And are we already doing any pilots sir on the secured lending?

Yes.

And the last thing is like, how do you really look at the broking distribution and the other financial income? Like how big can that be as a lever over the...?

Mutual fund distribution can be really, really big because this is equivalent of building a book because we have done -- there were 2 kind of business models in mutual fund distribution as you're aware, which is direct where the platform charges the fee or earns income. So we have started to expand on the fees income kind of model and the numbers are growing very, very well. So I do believe that mutual fund distribution and insurance distribution over the period will become the third leg, like payment, credit and mutual fund distribution or plus insurance distribution and insurance distribution we've been able to find both side takers, consumer and merchant.

That was the last question. [Technical Difficulty]. Earnings call and the transcript will be made available on the company website subsequently. Thank you all for joining.

Thank you, everyone. Thank you so much.