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 and year-ending on 31st of March 2025. We will start our call with Q&A after introduction to the management. From Paytm's management, we have with us Mr. Vijay Shekhar Sharma, Founder and CEO; Mr. Madhur Deora, President and Group CFO; Mr. Anuj Mittal, SVP, 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 of the statements made today may be forward-looking in nature, and actual events may differ materially from those anticipated in such forward-looking statements. Finally, this earnings call is scheduled for 60 minutes. A replay of this earnings call and transcript will be made available on the company website subsequently. We will start our Q&A now.

[Operator Instructions] First question is from Mr. Sachin Salgaonkar.

Congrats on adjusted EBITDA breakeven. I have 3 sets of questions. First question is largely on lending. We did see the personal loan value decline on a Q-o-Q basis. And I do understand it's basically on the back of tightening what we are seeing in the industry. Question out here is, should we continue to see this kind of a trend at least in the near term before things start improving? And a related question is, if you could help us understand how many lending partners you have right now and where -- how should that number move going ahead?

This is Vijay. Personal loan disbursements were not -- did not grow quarter-on-quarter. Merchant credit definitely grew. And personal loan-wise, we are moving more and more towards pure distribution model where lenders pick up their own collection obligations, so to say. We do make same margins surprisingly. And merchant-wise, we've grown healthily, and we continue to see that. Personal credit, unless something bigger changes, we will not see much larger growth. While we have also started to work towards secure credit, secured based on various other items, and maybe that -- if that grows, we will see some numbers going back. And second part, Madhur?

On number of lending partners for each of personal loan and merchant loan, we have between 8 and 10 lending partners. Obviously, there's some overlap. So I think the total number of lending partners is about 14, if I'm not wrong, give or take 1. So -- yes, so that continues to progress well in terms of getting more lending partners onboarded.

Second question is on your expectation on MDR on UPI for larger merchants will be allowed in near future. Just wanted to understand if you could help us understand how should one think about the monetization opportunities as and how this happens from a Paytm perspective? And at some level, is it also linked to perhaps the UPI incentives decline what we saw this year? And any thoughts on how the government is looking about the UPI incentive going ahead as well?

Obviously, we do not know much -- and we will not like to predict how government is looking at it. But we definitely see talks of MDR coming on UPI, and we do believe that it should show up sooner than rather later. And we do believe that, based on what we are seeing, in current financial year, it could show up at any point of time. And that would bring monetization of QR deployment acquiring and the consumer app both. And I think the numbers, et cetera, and when and how is something that continues to remain to be discussed or to be seen. And that will bring so-called monetization to UPI. We do believe that.

And on the question about UPI incentive, I think at least the way we are running the business is that we expect UPI incentive to remain low going forward, especially, as Vijay said, once the MDR comes in, then it would only be for very small merchants. And it was never a very significant part of our business. Going forward, we expect that to be a lower number as indicated in the last year.

Vijay, just a quick follow-up out here. The Finance Minister did say that she wants 1 billion UPI transactions per day in the next 2 to 3 years. So at some level, perhaps we are seeing a monetization, which might add a bit of a friction to growth, and we have a higher target in terms of growth. And I do understand that consumers will not be charged on UPI, but the perception sometimes in the market always is, whenever an MDR comes, the consumers will be paying and hence, there's a bit of a friction. So do we still see this coming in the near future despite this entire target of 1 billion UPI transactions?

I do believe that there is a tremendous upside left and is ahead of UPI in the country. There is -- the Finance Minister is perfectly guided towards the size that we are expecting it. And I do believe that it is the perfect target to chase. Consumers are not going to be charged like I said. And I think in many cases, consumers misunderstanding does exist. But at the same time, I don't think consumers will be charged. At the same point in time, how MDR shows up, it is the work. I do believe that NPCI and other bodies are doing.

Got it. And my last question, your thoughts in terms of how much AI could lead to cost reductions? I did see a statement in your press release saying that this quarter, you did reduce some non-sales employee cost on the back of AI. So just wanted to understand the potential for AI and what kind of savings we could see in future?

I don't have a percentage, but I do want to tell you that amount of more and more automation is coming in. Overall, at large, more productivity per employee is showing up. We are not replacing the positions that get, let's say, emptied. So we are clear about it that we will be not recruiting incrementally if somebody, let's say, goes out. So practically, it may not look like a drop, but it will continue to, as cost of people decline, I do believe, because more and more productivity is showing up. And it is shocking to know what level of productivity can show up. I'm right now in Bangalore. We had a Board meeting. I was yesterday doing my team reviews. It was shocking that level of insights, level of skill from a senior product manager that we typically expect, and here, we had a global expert product manager. So it would be a dramatic improvement in ability and capabilities of companies. So I do believe that cost will continuously reduce, but there is no sharp one-off, et cetera, kind of thing that we are expecting.

Yes. I just want to add that what I'm really excited about is that we have really leaned into this, and we are doing a pretty good job of using AI's current capabilities. Of course, we can always do more. And obviously, the mega trend is that AI also continues to get better. So whatever opportunities exist today to become smarter, more efficient, leaner, those opportunities will be even more 6 months from now, a year from now. So we just fully leaned into this, and that I think is -- that is what really matters.

Next question is from Manish Adukia of Goldman Sachs.

So 3 questions from me as well. Firstly, when I look at, let's say, the business, the merchant side of the business seems to be doing really well with merchant acquisition, device installs, merchant lending like you alluded to, Vijay. But on the consumer side, you touched upon the personal lending business maybe somewhat subdued. But even, let's say, the user base, which has started recovering a little bit after the NPCI approval to onboard new users, but still significantly below the number where we were, let's say, 1 year, 1.5 years ago. One, I mean, is there a path to recovering the user base to where we were 12 to 18 months ago and what will it take to get to that number? And then second, is that important at all? I mean, do you really need MTUs? I mean, even if MTUs remain where they are or don't grow, does that really impact your, let's say, revenue growth, your EBITDA, et cetera? I would love to get your thoughts on that. That would be my first question, please.

Totally awesome way of looking at it, Manish, really admire the way you looked at it. The truth of matter is, our future forward earning and bottom lines are protected by the people who stayed on the platform. Incremental users don't matter, but persons definitely do. And I do believe that we -- if we don't do anything and simply keep focusing on the product, this improvement has come on dramatic lower cost that we would have spent a year back. So it is purely product improvement that is bringing it back. And I'm very proud of the team that is working on our app, UPI and other back-end and front-end technologies that they are just solving the bugs, solving the features. There is a very incredible feature that many of you may not know. Let's say, you made a payment and you want to -- in passbook history, right swipe, you can hide it. That feature is like growing like a wildfire for us. Now these kind of insightful features give us capability to build more and more nuanced products that we will see over the period. And I'm very hopeful that even though as far as the future forward, next 2 years, I have to write, let's say, revenue and profit forwarding, we will definitely do it based on merchant growth and the current consumer base. But yes, the final question, it does matter to us. I do believe that in India, there are about 200 million consumers that matter, and we definitely will aim for 200 million to 250 million customers on our platform. I'm not talking about, let's say, GMV market share, transition market share, but I'm talking about highly repeat usage of 250 million users because that is what a material number of users matter on our platform. And we are not -- as you've seen, we have not said that we are going to overspend on marketing. I would rather overspend on technology or attention to the product.

Right. Just trying to tie that response to, like you mentioned, disciplined marketing. I mean, can both things happen? Can you be disciplined on marketing, and just with product intervention, grow the user base by a substantial number? Okay.

Absolutely. And in fact, I want to tell you that the growth in user base did happen without -- in fact, we cut the marketing in these quarters to show only and give the confidence to the team that your product matters. So as you are seeing in the numbers, that is because of the good product and better product attention. And I want to give you another surprise, Manish. It is lesser number of people, more attention to the product that has got this, so lower cost in people operating, lower cost in marketing and get the growth. And I do believe without gangbuster marketing expenditure, we would be able to get it back. I do believe, and I'm seeing it also.

I appreciate it. My second question is on the comment in the shareholder letter on international markets. And there, again, as an outside and it feels like there have been like a few change in strategies in the past. International maybe was a bit of a focus area at some point in time. Then you decided to focus largely on the India business over the years. And now, again, let's say, you believe that some parts of your technology stack can be exported to international markets. So I just want to understand what would have changed versus, let's say, the last time when you thought India was the bigger focus area for now you to again explore international markets and the opportunity stack. I would love to get your thoughts on that as well.

Manish, when we long back had come in public markets, we had called ourselves as a platform where we were saying payment, commerce and financial services. And as you know, over the period, we said payment and cross-selling of financial services. And that meant that there is an ability and capability in the company of manpower, et cetera, technology, et cetera, that we created. And as far as the technology product market fit is concerned, we are very clear that what we have built in India, we saw it in PayPay Japan. We are seeing further products that we are developing and deploying with PayPay Japan and many other such similar partnership that we are in conversation. That product technology can be monetized in other markets. I'd rather call it product technology monetization in other market, and we are rather going to find out somebody who is locally doing it and extend that. So internationalization is not about that we are launching consumer Paytm app in other markets. Internationalization is about we are helping somebody in local market to build either consumer side or merchant side that we are talking about systems. And that way, then we have further monetization of product and technology platform. And it also came about number of people that we had. So because we had enough number of engineering and product people, and I love the capability that we leverage using efficiency, using AI and skill using AI that we are able to modularize much faster than earlier. So one point of time, we were like, oh, we would not rather spend anywhere else but attention to the domestic market, which is perfectly continuing. But we -- right now, because of the assistant code generations and all sorts of things like Cursor, Replit, et cetera, we are able to modularize the code and extend it for another market. So incrementally, very less technology product investment, which rather is not even further investment, rather reutilizing or utilizing internal resources and getting a market expansion because you are able to partner with someone who is doing in local market. So international for us is not launching Paytm app in different markets. International for us is expanding partnership of product and technology with some people in that local market. Mostly, we are seeing merchant side relationships are far better for us because there is a nuance of what they have built in ability to see it in many markets being incoming instead of consumer side. So maybe we'll see it like that.

Just my last question, maybe directed towards Madhur. I think, again, please pardon my -- like if I get the numbers wrong, but 2 or 3 quarters ago, I think Madhur, you had called out medium term, the business can potentially grow at like 30%, 35% plus on top line and 15% to 20% was the EBITDA margin target from at least a near-term perspective. Would you like to share any updates in terms of from the next 2, 3-year perspective, what is like the sustainable revenue growth that the business can look at? And where can, let's say, margin settle in the next 2 or 3 years? Any thoughts or color would be helpful.

Yes. I think the ranges that I mentioned earlier that you referred to, Manish, is what we are targeting for the next year, as well as -- in terms of growth, as well as longer term. And yes, the margin target for next 2 to 3 years remains in that range. We do think that the business has that much earnings potential, especially like Vijay mentioned, our indirect expenses have come down because of all the AI that we have leveraged. So getting to higher EBITDA margins is a lot easier in some ways because of lower cost structure.

Next question is from Sachin Dixit of JM Financial.

Congrats team on a decent set of results across the board. My first couple of questions are with regards to MDR, right? So let's say, MDR comes up anywhere, whatever 25 basis points, 30 basis points, whatever the number it comes up, how much do you expect Paytm is likely to benefit from it, right, in terms of your GMV, right? So if you think of, let's say, 25 basis points MDR, can you get 5 basis points, 7 basis points, 8 basis points out of it?

Logically, yes. That's rather conservative, but yes.

Understood. And this is largely in line to how you pay incentives were being distributed?

Incentives also have a lot of restriction on kind of payment they factor in. For example, like they don't factor in utility merchant, this merchant, that kind of merchant. So incentive distribution of transaction and bps per transaction will not be indication of MDR in my opinion, because MDR is a wider payment fees.

One critical difference between incentive and MDR is that incentive was only on transactions less than INR 2,000, so just keeping that in mind. And then, obviously, there will be detailing. And I think it's slightly premature for us to talk about exactly what the number will be because they'll be detailing as a part of this finalization what the MDR framework looks like, and basis that, we'll be able to talk more. But yes, Vijay has already given an indication.

Sure. Second question would largely be on -- let's say, right now, on surface level, it feels like because the costs of incurring this business are already there in the P&L, whatever MDR comes, it should directly fall all the way to EBITDA, right? But when I'm also thinking of it, let's say, monetization is allowed on UPI MDR, it might result in heightened competitive intensity and a number of people might try to gain that market share. So is it safe to assume that the margins will be significantly lower than 100%, or it will be closer to 100% is...

So when we think about what the likely scenarios are, of course, like I said, it's a bit premature because we don't know exactly which segments we are talking about and so on. We do factor that for the larger merchants, there will be some competitive intensity, and you may not be able to exactly charge the cap or whatever that is. So -- and then, Vijay gave an indication, keeping that in mind. So yes, it does factor in that you're not able to charge. And it is similar to what we today do on credit cards and debit cards, right? So we are quite familiar with how that works, which is to say which merchant -- on which merchants are you able to make a slightly higher net payment margin and which merchants you make slightly lower net payment margin. So yes, there is an understanding of competitive intensity and how it relates to net payment margin within the construct of an overall cap.

Got it. My second question is with regards to your business as it stands, right? So when you look at your business and maybe the reason why Vijay also alluded to that product is how you want to differentiate in terms of customer acquisition. But do you also target some sort of ARPU per customer, which is the driving metric behind how much you go about and try to invest behind acquiring a customer? Or you are generally going to take the tech-led approach and let the consumer sort of affinity shape up wherever it shapes up?

No, we do bother about it. That's why we are not randomly spending money in acquiring customers when we got the UPI customer acquisition permission. Like you heard me say, 200 million customers, that's a fairly small subset of the potential consumer base that UPI will have. But I'd rather have the material useful customer on the platform than to have a race of what you do with this customer.

Next question is from Rahul Jain of Dolat Capital.

Hope my line is okay.

Yes.

So the question may sound a little repetitive, but just trying to understand from a growth point of view, what are some of the opportunities that could be the bigger driver for us going into next fiscal? Are they going to be the same set of 2 or 3 segment which needs to do a bigger lifting in the '26? Or do you think some of the current segments which are not performing so well, be it consumer side personal loan side or any other thing that could pick up to add growth traction in [indiscernible]?

I think, Rahul, I'll probably break that up into 2 logical parts. On the merchant side of the business, we see the same trends really, right, that if you look at second half of last year -- of course, in the first half, our deployments were lower. But if you look at the second half of last year, that's a pretty good indication of where the business is headed in terms of gross deployments, GMV growth, highly engaged merchants and then merchant loans, and all of those are very powerful drivers. And I think most people tell us that, that part of the business, they see structural advantages of Paytm and very good momentum, more or less uninterrupted. On the consumer side of the business, I would say that last year was a cyclical low. So on the one hand, for about 6 or 7 months, we were not adding new customers. On the other hand, the monetization levers were slightly lower, partly due to credit cycle and so on. So if you think about going forward, Vijay has talked about consumer growth and how that is going to come, product-led and then eventually, maybe we make slightly higher investments, but initially product-led. And then, on the monetization side, we see opportunities clearly on -- if there was, for example, an easing of the credit cycle, that would have a positive impact on personal loan and credit card. If we see continued growth in trading volumes in India -- of course, last 3 or 4 months, there were some regulatory developments, which -- for the industry, which lowered the trading volumes, but now the business is growing again. So Paytm Money, which is our equity broking platform, we feel very interested in, and finally, advertising, where we think there's a lot of opportunities for us to make more advertising revenue. So, on the consumer side, we're starting the year with a lot of optimism, both on the base, which is the consumer -- highly engaged consumers and number of transactions and so on, as well as the monetization opportunities through those 3 or 4 areas of upsell that I talked about.

Right. And just one more question, just to understand how usage of this DLG has led to increase in the take rate, so what should be the -- with changing, evolving mix of DLG, what should be the ideal take rate for this segment? And secondly, how it is changing the perception of the lender in terms of approving the widely-spread potential merchant or clients from our perspective? Has that increased the threshold for the lenders?

Yes. On the second question, I don't think we necessarily ask our lenders to change their behavior just because they are DLG and we also hope that they don't do that because we do want eventually to target a range-bound and predictable expected credit loss. We think that is fundamental to -- a fundamental indicator that you're building a high-quality franchise. So ultimately, as we have said enough and more times, it is the lender's decision. Obviously, we do some filtering on our side, but eventually, it's the lender's decision to say yes or no to a loan. But we don't see a change in behavior, nor do we encourage or request or expect a change in behavior. The expected credit losses on merchant lending have been quite positive since April, May last year. So we don't have any concerns that FLDGs are making them less disciplined on credit losses. So I think that's the good news. I think in terms of take rates, if you look at our historical take rates, it should be about 3%, 3.5% higher on the merchant loan side, which, on a blended basis, probably means about 2% higher for financial services because obviously, there's a percentage of it, which is personal loans.

You're saying 200 bps more than the past? I could not follow that.

200 bps more than the past, i.e., compared to the period when we were not doing DLGs.

And it ideally should go higher as the mix improves, right?

Well, higher, although it will depend a little bit on PL versus ML mix and FLDG versus non-FLDG mix. Merchant loan does make us a slightly higher take rate anyway compared to personal loans. So there would be various factors, but yes, there...

But overall, it doesn't make commercial difference in a different direction.

Yes. Just to be clear.

It is not a higher net rate.

Just to be clear, merchant loan, when I say 2%, I mean -- the reason I say 2% is because not all loans have FLDGs, right? So for loans -- like-for-like, loans that don't have FLDG versus loans that have FLDG, if we are giving about, let's say, 3.5% FLDG, then we expect to make 3.5% more take rate, maybe more, but 3.5% more take rate through the life of the loan, right? The 2% number I was giving you is because not all loans have FLDG. Talking about take rate and literally taking revenue divided by loans, then you expect that to be, call it, 2% because, call it, 50%, 60% of the loans might have FLDG.

Right. And just a clarification, 3.5%, that is at least number, right?

Yes.

And if the performance is better, it could be much higher than that?

But just -- 3.5%, I'm saying, assuming same ECL, same partner and loan without FLDG, loan with FLDG of 3.5%, the revenue would be 3.5% higher. And of course, you would have FLDG cost of 3.5%. So that's the point that I was making. Yes, depending on the performance of the loan, we do make collection incentive anyway, which at the same ECL would be the same, whether it's a non-DLG loan or a DLG loan.

Okay. So there's no extra incentive for doing a DLG for the same performance or outcome?

We don't do DLGs from the perspective that a DLG loan will make us more net take rate. We do it because our lenders, in some cases -- lending partners rather, in some cases, have a preference for it. And as a result of that, they are -- the volumes tend to be higher. So a partner who may have done X, if there was no DLG, may do 30%; 50% more if there is DLG.

Right. So it's a volume advantage versus price.

Next question is from Piran Engineer of CLSA.

Congrats on the quarter. Just firstly, on payment processing charges, we've seen a good decline in the past 2, 3 quarters. Is it just a function of mix? Or are we able to negotiate better rates with our partners?

It is a bit of both. I think, compared to last quarter -- obviously, last quarter had festive season versus not. So, that Q3 to Q4 tends to work a certain way. And then, there is an element of just continuously doing a better job on processing costs with our partners. And I think you saw that trend in 2022 and '23 as well. So we just continue to work on that.

And is there scope that this goes down further, assuming mix remains stable?

There's always that effort, but I would point back to the payment -- net payment margin and payment processing margin discussion, Piran, which sort of normalizes for this. So our effort is to continue to improve payment processing margin and -- across instruments and across merchant types. And then, payment processing cost sort of takes care of itself. And it is actually something that you have to work on constantly to make sure that you are able to be competitive and attractive to your partners, while maintaining and improving our payment processing margins.

Okay. Got it. And just secondly, I don't mean to harp on this MDR thing, but if you could just give us some sense of right now, what are the talks like with the government? Is there a particular push-back that they have, which is why it hasn't yet happened? Or is there sort of an in-principle approval right now, but the concerned parties such as you and other fintechs discussing the nitty-gritty?

We are the client of the network. We are not the network. We are the client of the network. Network is NPCI, who decides and works with all these partners.

I'm not going to discuss all those things, but clearly, the powers that we are discussing this. And I'll go back to what we said a couple of months ago, which is that the industry is expecting this to be a thing, and we will hear back on this hopefully soon. And then, we'll have a little bit more clarity to share in terms of how, whatever that framework is, has affected our business, and we'll share that quickly with our stakeholders.

Okay. Fair enough. And just on Paytm Money, if you could just broadly highlight what is the revenue right now, if it is meaningful? And how do you think about this business over the next 3 years?

[Foreign Language] It's not very large, and we do believe it's a great upside. It has a customer lock-in also. So we have gone into mutual fund distribution. We are trying to find out MTF kind of margin trading, et cetera, kind of monetization. So -- and those have come out positive. So it doesn't take investment anymore. But at the same point of time, it is a great opportunity. I can see that it is -- in so-called less trading quarters, if you will, last couple of quarters, thanks to both F&O and normal trading being reduced, it has been able to turn around better.

Okay. But like, Vijay, could it be like, say, at least INR 200 crores, INR 300 crores annualized in terms of revenues?

[Foreign Language]

That's about the scale, and it has a very good mutual fund business, which helps us, like Vijay was saying, with customer lock-in, and it's a fantastic trading platform where we make most of our revenue. And then, we have also launched MTF in December of last year, which is scaling up nicely. And we are very positive, and the customer retention is good and ARPUs are good. So we're very positive about scaling that business over the next 2, 3 years.

Next question is from Vijit Jain of Citi.

Congratulations for the breakeven even excluding the UPI incentives. So my first question is on the consumer business side. Can you comment on the prospects of return of wallet? I know some of your peers have introduced wallets recently. And I've also noticed the app has gone a lot of product changes, seems a bit more simple -- significantly more simple. So I just wanted to get your thoughts on what's driving that? Is that an objective to kind of make the app light, increase user base through making it speedier, lighter and those kinds of things? So if you can broadly talk about that?

Thank you. You're a user, I'm glad. And it was long due. We've been very crowded, cluttered for a long enough time. And among various things, as housekeeping exercise, my personal interest was to make app as simple as that we started this business with. So right now, I'm glad that you're calling it out light because surprisingly, no traffic or no internal businesses have less traffic, if you will. In other words, that -- the lightness is rather not costing us any growth line item to cross-sell of other line items. So that's the approach. My theory is, if customers love you impeccably well, and keeping payment-led super app concept is better than calling super app first, payment second. So payment first, super app role second, versus super app and payment second. That's the approach that we took, and we are seeing good results, and you saw the uptick in the number of consumers that come back also. And when you talk about wallet, I really wish we would have had it by now as in terms of one way or other, but we may be near a breakthrough or some solution to way forward. So we are just trying to keep it -- finger crossed and see we have multiple options on the table, and we could decide not many months ahead in future that what is the call that we'll take. We had a Board meeting today. We did discuss about it. So we have something to discuss as management and come back on.

Got it. My next question is on -- the shareholder letter also notes that you've applied again for the payment aggregator license to RBI. So do we have any additional inputs on that? And do you expect that to also come about in the near term? And yes, I'll just follow up with a quick question on MDR after that.

Yes, we do. And there were some next steps that RBI suggested us to do. We've been doing those.

Got it. Great. My last question is on the MDR incentives for the quarter, right? So even -- I know the government has obviously slashed the incentives that they gave. This is almost smooth now, given MDR is actually being expected. So the UPI incentive, sorry, is being slashed. And your share of UPI transactions, obviously, in FY '25 also went lower. Still INR 70 crores seemed a bit low. So what I wanted to understand is, did something change here? Or did your share of small merchant, small ticket transactions was lower this year? Is that what drove the INR 70 crore number? And relatedly, because I see that the payment processing charges are also significantly down quarter-on-quarter, so I'm just wondering if I should just look at the net payment margins here and not look too much around that INR 70 crore number because that just seemed low to me.

Yes. So most of this is the reduction on incentive overall. So what GMV is eligible, how much does the industry get paid, all of that has been reduced, right, quite meaningfully. Like-for-like, we would have made a little bit more. But the 2 factors that have affected us is that while we're doing really, really well on merchant payment side right now, if you just take the average market share through the year last year versus the previous year, it would have been slightly lower because in the first half of the previous financial year, we did have some market share dips. And obviously, we shared that very candidly. And we've talked about 8 lakh to 10 lakh devices. And obviously, it was apparent from our GMV data as well. So if you just take the average GMV, it would have been lower. And obviously, we are talking about the entire year, so UPI incentive. And the second is that there were small changes to acquirer share versus the rest of ecosystem share in the new framework, which is to say the acquirer share was slightly lower. So that affected us marginally as well. But this number wouldn't have been like -- yes, compared to INR 288 crores, it looks like a low number, but it wouldn't have been like INR 150 crores or something, right? It would have been marginally higher if those 2 things had not happened.

Next question is from Anand Dama of Emkay.

My first question is on the PL business that's still declining for us. Is it that the decline is attributed to most partners reducing their business with us? Or is it that a few partners were lumpy in nature and that's where basically we are seeing a decline? And by when do you expect the disbursement number to largely bottom out? I think you've talked about in the presentation that possibly later part of the year, we should see some pickup in that business. If you can just talk about that, number one. Number 2, your financial services customer base has declined quarter-on-quarter to 5.5 million. Is it more seasonal in nature? Or there is something more to read into that?

Anand, personal loan business, we are tactically moving from distribution plus collection business to pure distribution business. And there, our partner growth, integrations and in due course disbursements have been continuously growing. And I can say that we believe that there is demand and supply in the market based on credit cycle. The part where we also do collection as an obligation is something that we will bring it back on the table once the market or credit cycle turns around. So in a way, we right now are doing the business, which is pure distribution, like a marketplace distribution. We have added a few more line items like loan against mutual fund, et cetera. And those will have started to kick back. So that's the reason of personal loan not same as Q-o-Q. At the same point in time, we are not much going to aggressively go any which ways in personal loan distribution business where we do believe that there is a large amount of stress in the overall market, which is getting eased out. And instead of being aggressive, we let it be that whatever the lenders need and whatever the policy pricing lenders are doing, the market is behaving like that. So that is not much different from our side that we are doing less or more.

On the number of users, Anand, it was partly because of personal loans that Vijay just talked about and the volume disbursed number that you have seen. And it was partly in terms of active users in the equity broking industry, which Paytm Money is a part of, as you might be aware. Call it, from December to February, largely, there were some regulatory adjustments because they wanted slightly less trading, if you will. And so, they increased -- they reduced the number of settlement cycles and so on in the industry. So overall, there's been a lot of press coverage that industry volumes are down about 30%, 40%. So the number of Paytm Money monthly active users would have declined along with the industry. So those are the factors. We are very positive that this should start growing going forward.

I'm going to take a question from chat window where [ Ravi B.R. ] has asked this question, but I think, Anand, after your question rather. I would wait for your second question.

So second question is on the DLG cost. So is it possible for you to share how much is the DLG cost in the current quarter? There is some trade income also that you've talked about on the DLG front. What is that? Any new partners where you have gone for DLG in the current quarter? And one more question is on the ESOP cost. So earlier you used to provide the ESOP cost schedule. I think you just provided for the first quarter how much it is going to be. Is it possible to provide for next 2 to 3 years?

On ESOP cost, we -- because we're sort of still finalizing certain grants right now, we didn't want to share quite a number. The INR 75 crores to INR 100 crores that we have talked about is for the next few quarters. So we expect that to be in the range. When we do the next quarterly filing, which will be 2-odd months from now in July, we will share the updated ESOP cost schedule. So that is a feature that we have this quarter. We didn't have it, and we put this range because it was sort of work in progress. With respect to DLG costs, we -- it's a slightly commercially sensitive information, so we don't share that. But we have indicated on previous calls that blended, it's about 3% to 4% DLG that we get, and that is not on all lending. It's largely on merchant lending, and it's largely -- and it's not all lending partners, but it is a very substantial majority of that. So basis that, you could probably get some estimate of what that number is, but we don't want to share like exactly what that number is.

Sure. And any new partners you have tied up with on the DLG front?

We currently have 3 partners on DLG. There will be a DLG disclosure that will go up on our website -- which is already on our website, sorry, I've been told. It is already on our website, which talks about -- it's a regulatory required disclosure, which talks about how much AUM you have under DLG under different, they call it, portfolios. Each portfolio indicates, for us, a type of loan with a type of partner. So portfolio 1 would be partner A, call it, merchant loans. Portfolio B might be partner B merchant loans and so on. So that is already on our website.

Vijay, we will take one question from the chat window.

Yes. I just saw this question from Ravi, who is from Bangalore. I'm a long-term investor in Paytm. As an investor, I'm more interested in Paytm showing profit as early as possible. As you're not able to show profit this quarter because of exceptional expense of INR 522 crores related to ESOPs, did you consider splitting this expense to multiple quarters so that it could have resulted in profit this quarter? Is there any compelling reason why you booked this full expense this quarter? Ravi, this is all audit matters; auditor decides, we follow. And the way auditor suggested, we did it. And as you can see, this exceptional charge is something which everybody logically should see is a one-off, onetime and exceptional in nature. We are at the verge of PAT profitability if you were to see every other expenditure and thing. I'm very sure that in next quarter onwards, if everything goes as we are seeing, it could very well be a PAT profitable quarter.

Next question will be the last question. This is from Prateek Poddar of Bandhan Mutual Fund.

Yes. Just a couple of questions. One is, when I look at your key financial services customers, the data -- I mean, on a sequential basis, there's a decline, whereas the financial services revenue income has gone up. So I just want to check what has happened over there.

So our financials -- I think I just mentioned this a little while earlier. The financial services customers have decreased largely in 2 segments. One is personal loan, where obviously there's a disbursal data to also look at, which we have shared. And the second is, in Paytm Money on a quarter-on-quarter basis, these numbers have reduced because from December to February, there were some regulatory adjustments from the capital markets regulator, which affected the F&O industry overall. There's enough and more news stories about how much trading volumes have gone down and so on. We do expect that to recover, and we're already seeing recovery in that. So it definitely looks like it's bottomed out. Financial services revenue has grown because the highest margin and the highest ARPU product, if you will, which is merchant loan...

Merchant loan, yes, I would...

It continues to do very well. Yes, so you already got it.

And sir, last question. When I look at software, cloud and data center cost on a sequential basis, that has declined by 10%. I just wanted to check if there is any correlation with total number of transactions because that seems to have gone up. So has there been some efficiency gains over here? Or what has led to this 10%?

Yes. Actually, that is what I've been continuously putting up. This is classic AI. When you give AI an opportunity to review things, it goes beyond human logic that you typically use. So you very well pointed out, and it is a very sharp eye, I must congratulate, and this is attributable simply to putting AI in every process and cost line item that what do you think we should be doing? If kind of practices we are doing are following? What else we could do? Then, I'll just give you a clue about things, right? Let's say, you have a cloud where the machines are dedicated so that any spike, you are able to take care of the minimum sort of permission. And then, AI was able to say, based on your pattern, I suggest that from this hour, typically in a night hour, you could just reduce them to dramatically low volume. And then, it's like day-end closing balance, float revenue kind of thing in compute industry also where if you're not using compute for those hours, you can do it. Similarly, internally, we are picking up AI inferencing in a way that we start to use the downtime of our peak systems or the time when the peak traffic is not coming to do the inferencing. So there are tons of insights. I mean, I'm glad that you pointed it out, and I'm going to point back that, yes, it is efficiency by the team's effort on finding cost efficiency.

I just want to make 2 other quick points. One is that when we did the migrations in the first half of last year, obviously, the most important thing was to do the migrations, right? And since then, using AI, the team has been working hard on finding places where -- because it was a time-bound activity, finding places where we could have done things more efficiently if we had more time there solving those things. Second is, while we're very pleased with the improvement, I would just slightly discourage us looking at quarter-on-quarter trends too much because there is sometimes a little bit of volatility here and there. But we are quite pleased that our tech teams and our DevOps team is very focused on very cost sensitive, and that is a good place to be as an organization.

I'll take a few more questions from the chat window. [ Laksh Aftari ] has said that in past, company's core business faced significant challenges. Despite these disruptions, companies have demonstrated remarkable resilience. Currently, there seem to be renewed focus on strengthening the core business, given the unpredictable nature of the market, do you believe it's strategically sound to double down on core? Or would a diversified approach, exploring adjacent or alternate business segment offer a safety net for long-term stability and growth? Very, very good question, Laksh. And my answer would be that in India, we have an obligation to focus on the core because that is what the business model has got scalable, profitable, identified, learned and so on and so forth. And the best part I can tell you is that we are able to see that result as you are seeing. And as far as adjacency and alternate is concerned, we have tried to find out software services, software that we can expand to the other fintechs, banks or other people, which we also found out in neighboring geographies also. So that is our alternate additional market or incremental revenue that we found out. It's very simple, no incremental much cost, and you get more revenue on the bottom line side. So Laksh, that is where it is. And I can see [ Srinath ] asking, share your 3-year vision on innovation on this platform of payment and financial services, what new product can we expect? Srinath, I'm going to say that when we look at 3 years, the best thing is that the products that we are talking -- I mean, in other words, it's like saying you can continue to expect payment and cross-selling of financial services continuously going much deeper in the last 3 years. The cost and the innovations of the quality of product will be very, very different. As you are aware, we started to build new products and services, app you saw, consumer side, you will see -- and devices you saw. So tons of machines and AI-based capability will be in all workflows. I'm especially -- I mean, not going to say the particular feature right now in this call right now because this is a more earning call, but you can expect us to build continued innovations in consumer and merchant sides as we have done in the past. And what we are building, I'm very, very proud of and very, very excited about those things. Can you comment would you be probably 100 billion business by 2035? Thank you. I mean this is an earning call. When will ESOP reduce, shareholder will get dividend or share appreciation? I think ESOP cost, as you are aware, we had a onetime charge, and overall ESOP costs have reduced quarter-on-quarter. Next quarter onwards, that will be much lesser, all because of this onetime charge that we have incurred in this quarter.

And because Vijay gave up his ESOPs. So instead of INR 169 crores last quarter of ESOP charge, going forward, we have currently given an indication of INR 75 crores -- no more than INR 75 crores to INR 100 crores, and we'll update that guidance in the next couple of quarters. So it's going to be a significantly lower ESOP charge going forward.

With that, we come to an end of this call. A replay of this earnings call and the transcript will be made available on the company website subsequently. Thank you all for joining. You may now disconnect your lines. Thank you.

Good night [Foreign Language]. Bye-bye.