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, 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; and 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 statements made today may be forward-looking in nature. Actual events may differ materially from those anticipated in such forward-looking statements. Finally, the earnings call is scheduled for 45 minutes. A replay of this earnings call and transcript will be made available on the company's website subsequently. We will start our Q&A now.

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

Congratulations on a good set of numbers. I have three questions. First question, clearly, Vijay, Madhur, we did see a good amount of cost control, be it marketing, other expenses and CapEx for sustainably a number of quarters. So question out here is, is there further room to cut without impacting, let's say, revenue growth because, obviously, if you cut marketing, there is a bit of an impact on growth?

Thank you, Sachin. I do think there is always a corner where we are able to find some costs, but they will not be material. So it is not the agenda. It is rather investing in a few more line items that we believe in our long-term growth. So we are not actively pursuing cost cuts, while I'm definitely pursuing, whatever is not necessary, drop it out of the window.

Okay. Got it. Second question is I wanted a bit more clarity in terms of your lending book. I know in the past, you guys used to give a good amount of disclosures, but any color in terms of how is the mix between, let's say, personal and merchant loan. I do think this quarter the value of loan disbursed is also not given. So I do want to understand where the numbers are. And a related question is the mix between DLG and non-DLG. Is it because of the lenders where the mix is now getting skewed more towards non-DLG or could that change basically how the lenders get changed from a medium-term perspective?

So first thing first, it is the same lenders who have decided to forego DLG-based maths because they see the book performing great for their references. It is not about adding new lenders who are not taking DLG. So it is strictly about current lenders that have existed previous quarter or previous to previous quarters, number one, which inherently adds that the book has performed incredibly good for lenders to have the risk and comfort to be deciding because you know there were various clearances and clarification that got issued. And as far as the mix is concerned, I can say that we've linearly extended the previous quarters. The problem of not giving the numbers separately, as you are aware, we've been discussing it many more quarters before. It gets misconstituted that we are the lender or we are lending, when we say we distributed so much of loans. We kept trying different, different words, but we do not want anyways whatsoever, anybody to misunderstand that we are not owning responsibility or book of these loans. So we being the fee-based income, we started to say, let's just talk about the fee. I'm very happy to hear and learn and you will be very gladly all of us are available that what KPI should we help you understand these things that you are asking for. As of numbers, they've been very linear, traditional sequentially, and the previous lenders who have been continuing with us ever since are the lenders who have decided that they don't need DLG. So Madhur, more?

Yes. And just indicatively both personal loan and merchant loan grew last quarter, both in terms of revenue and disbursals and also the mix is roughly the same as it was last quarter. So there has been no sort of qualitative thing to report. And of course, going forward, if we do see qualitatively different trends, then we'll call that out. I think one of the things just to echo what Vijay just said is that, you -- I think a lot of people on this call do understand that we are purely a distributor, but we did find that there were other stakeholders who were getting confused by this. We are happy to receive feedback on what might be helpful from a modeling standpoint without causing confusion.

I'll get back offline in terms from a modeling perspective. But just given the fact that the mix has not changed as compared to last quarter between personal and merchant loan, the question out here is we were expecting a recovery in the personal loan. Are we seeing no recovery and hence the mix has not changed at all? Or are we still seeing recovery or perhaps a recovery at some point away in the personal loan?

No, no, not significantly recovery. It is linear.

Got it. And last question is, again, now that you have turned positive on EBITDA margin, any guidance or any medium-term steady-state adjusted EBITDA margin we should look at it? And of course, related question is contribution margin has significantly improved now at 60%. Is this a sustainable level, ideally, we could look at going ahead and perhaps a bit more room to improve from this super high level?

Maybe I'll take one by one. On contribution margin, we are at 60%, as you noted. Last year, same quarter, we were at 50%, so significant improvement there. We have set high 50s, so we want to just leave some room for quarter-on-quarter aberrations. But we do think this is the right ballpark for us going forward. With respect to EBITDA, so we are not doing adjusted EBITDA anymore. We're not doing EBITDA before you saw, of course, this is straight up EBITDA, reported GAAP EBITDA. We do think that what we had said earlier about 15% to 20% over the next 2, 3 years is still the number to drive towards. And that seems more achievable today than even a few quarters ago because, a, the contribution margin is very good. And we are seeing that keeping a tight leash on -- sorry, indirect expenses overall does still allow us to grow very well. But as we just said, we may do a little bit more in investments, but more than offset by growth in contribution margin.

Sachin, EBITDA before ESOP happened last quarter. This is the last -- this is the first quarter where we are, obviously, if you read the earnings release, we have pruned out every word, which included EBITDA before ESOP, PAT before ESOP or anything before ESOP. Next quarter onward, we will stop giving the ESOP line, and it will be only the employee cost, so that we are maturing towards absolute complete employee costs, including EBITDA or PAT where the ESOP cost is the cost to the management. So there we go, no more adjusted anything.

The next question is from Piran Engineer from CLSA.

Just before the technical questions, there was this press, BSE release right now. So Madhur, you're not getting reappointed on the Board or you're seeking not to get reappointed? Anything to read into that? Or like have you been at the Board just for a short time or since inception?

No, I've been on the Board for about 2.5, 3 years. And there was never the intention that this should be a permanent thing. We wanted one Executive Director on the Board. So I did a term and now our General Counsel is being nominated for this. On a personal level, I've been very much looking forward over the last 2 or 3 years to drive some business priorities for the company. But quite frankly, simply didn't have the bandwidth with everything else that was going on. So I'm really, really looking forward to going back and driving certain big business initiatives. So that's going to be the road map. And we just need to free up bandwidth for that. I would rather do that than sort of Board level governance.

Piran, the important thing is if you notice that we've gone focus, focus, focus. So Madhur's bandwidth rather than being a Board representative in an operating representative or operating action is very more -- very much more valuable. As you noticed, our future forward growth line items, they are all about revenue and profitability by the same businesses and a little bit of expansion into international markets. So overall, there is a tremendous amount of work operatingly on the table. And I think there is the responsibility of the Board-wise, we got a GC so that more compliance, compliance, et cetera, et cetera, kind of updates can be taken care.

Okay. Okay. That clarifies it. Just moving on to the quarter. In this quarter, ballpark, what percent of our disbursements would have been under FLDG?

I think I would rather not give the exact percentage, but I mean, you can see from our direct expenses decrease quarter-on-quarter, and that will give you a sense. We also report partnered portfolio AUM on a monthly basis as per RBI guideline. But I can tell you that, that number is down. Even that AUM number is down over 40%. So you can imagine that the new disbursals are significantly more under DLG than before DLG.

Correct. So then, Madhur, the Q-o-Q decline, which it's almost halved, that's pretty much attributable only to the change in DLG stance? There are no other products or services that have caused this decline? Hello?

Sorry, just because -- I apologize. So the other costs have actually gone up a little bit as they do sort of quarter-on-quarter as you're growing the business. So the DLG impact is even sharper. But you shouldn't assume that because that line has halved that the DLG has halved. The DLG has gone down very, very significantly.

Yes, important thing. We actually had an incredible quarter for merchant disbursements and portfolio quality. DLG is not the needle mover, single reason. Rather, there is a tremendous amount of growth in credit disbursement itself that we saw. If you see the revenue, that would help you understand because DLG was coming in the cost line item, we still are showcasing on the revenue side of the financial services. And that is needle-moving behavior varies from the merchant-moving.

Got it. And -- but -- and if I compare it on a Y-o-Y basis, last year, first quarter, you all had not started DLG. This year, first quarter, you all might have done a little bit here and there. It's still down. So I have to think of it as it being down because of that business that was sold to Zomato, right?

Well, we actually have a little bit of commentary on that later on. So you're absolutely right, though. So first quarter last year, we had no DLG. This quarter, we have a small amount, but less than previous quarter. And the reason for reduction in expenses is some cost rationalization. Also our -- of all the business that we have done historically, our collection costs are down quite a lot on a sequential basis because -- and also on a year-on-year basis because, especially in personal loan, our partner AUM, which is under collection model is down quite a lot, right? Because, a, the overall volumes are lower, and b, we have moved a large amount of volume to distribution-only model. So our collection costs are down quite a bit as well. So when you look at year-on-year, you have to adjust for that as well. And we have towards the back in indirect expenses, given some -- sorry, under direct expenses given some sort of qualitative factors for it, just so that you have a sense of the trend lines in direction.

So other thing important, you should know, if you read financial services revenue INR 561 crores, it is overall, if you've seen quarter-on-quarter, and the number is because of DLG not being there, this is lesser number. It could have been higher if we had the same amount of DLG that we would have issued in March '25 because the loan closure, we are able to recover the DLG and the revenue.

Correct. No, no. I get that. I'm just trying to work out some math. Okay, this answers my question. Just lastly, in terms of the POS business, I see you've given some qualitative commentary at the start. Are we rethinking how we do our POS business just as a distributor, while the bank owns the POS machine? You mentioned this for the enterprise-level merchants. And just broadly, out of your 1.3 crore devices, how much would be POS?

The important thing is that we do not do that business where the bank owns the customer and we are just putting hardware on behalf of bank and calling it...

No, other way round, Vijay. The bank owns the machine, you own the customer, [Foreign Language].

We don't do that. We don't do this business. We own the machine, we own the customer. We are in that business. And that is what we have tried to qualitatively talk about because it is important to note that there are two business models where one, like you said, bank owns the customer or bank owns the POS versus our model where we effectively own the customer and the machine, and we route the payment processing to a bank. And that is the business that we are in. That's why we call it full stack. We are not saying that bank owns the device or owns the customer, and we are being called POS provider. No, that's the business we don't have.

Okay. And just the number of machines would be useful.

It's -- the number of subscriptions that you're seeing is customers are owned by us.

[Foreign Language] Out of 1.3 crores, most will be soundboxes, right? How much would be POS machines?

I get it, roughly 1 million, 1 million-plus. You should also know, Piran, that as we see the entire gamut of the market, historically, we have thought about soundbox and EDCs as two different things. Now it's a spectrum because now we also have a Card Soundbox. Now we have a Card Soundbox with a screen. So the only thing that it really doesn't have, which an EDC has, is a printer, right? And we actually have Card Soundbox with a screen with a chip and PIN, right?

And these are being installed in enterprises.

So now this is an entire spectrum, and you're right to say that, that 4 years ago, we were saying Soundbox and EDC machines. But now Soundbox that can accept cards, tap and chip and PIN, and has a screen, that is effectively an EDC for a merchant who doesn't believe in...

So Piran, being a hardware, software and services full stack owner, we were able to build hardware where what is needed is added and what is not needed is removed. And that is where the edge over anything else is. Other companies source hardware from China. Do a CapEx deal on a rental, and that's a payment business. We don't call it payment business. We design our own hardware. We own our own software. We are -- we deliver our own services. And like you just learned, the idea of creating many more layers between the paper QR to, let's say, an enterprise online or you can call it, peak, POS billing, POS machine, are that there are so many devices. It's like a phone business literally that there will be so many layers and types of phones in-between, size-wise.

The next question is from Mr. Sachin Dixit from JM Financial.

Congrats on a great set of results. My first question is with regards to the shareholder letter mentioned that the Payment Services business operated at breakeven. One housekeeping question, what all revenue line items are you including there? And largely from a longer-term perspective, how do you see profitability in this particular Payment Services business going ahead?

So payment business includes subscriptions and any interstate MDR, all those kind of incentives, et cetera, that we call out. It does not include any financial services, everything whatsoever. And obviously, the marketing services in a way. So it is payment related, billing that we would have done to the merchant.

Right. And how -- on profitability, please?

I do believe payment is profitable business, like you're seeing without UPI MDR, we are talking profits. And I do believe payment central is profitable and has an operating leverage. We continue to push operating leverage of creating more solutions and value adds on top of as basic as processing, if you will. And that's where the differentiation in the payment business comes. I continue to believe that payment stand-alone will be bottom line driver and a large bottom-line driver once these MDRs also show up. In effect, today, we are calling breakeven and tomorrow we going to call large profit from payment. And that's why I keep saying, focus on the core, we have a great business.

Perfect. Perfect. My second question is on the contribution margin side, right? Obviously, this quarter, we reported a 60% contribution margin, which looks quite good from a sequential or Y-o-Y basis. But there will obviously be some impact of FDLG-based trail revenue coming in from the last few quarters that we have issued, while there is no DLG expense on the like-to-like. So I'm guessing there might be some onetime impact being there in that contribution profit.

Sorry, please finish.

So I was just saying like, so can you break down maybe how many percentage points would be because of, let's the trail revenue coming in this quarter versus there being no FDLG expense?

So to be clear, this is not -- I wouldn't quite call it a onetime impact. I think you're right in observing that this quarter, we rather suddenly don't have a significant amount of DLG costs. But the fact that we are doing a large amount of non-DLG business will mean that the trail revenue will be a bit lower compared to if we had done DLG business. So yes, there will be some impact of not doing DLG on just future financial services revenue. We don't think that's very significant. And like I mentioned when I think Sachin Salgaonkar had asked a question that that's part of the reason why we think our guidance should be high 50s rather than guiding to specifically 60%, which is what we have already achieved, although there are drivers in the rest of our business that can move this number upwards.

Sachin, your question of if we had large trail revenue, answer is last year in this quarter because these are 12-, 14-month loans was not very large.

The next question is from Mr. Pranav Gundlapalle from Bernstein.

Just had three questions. First is on your BNPL product. Is a resumption of BNPL contingent on you getting your wallet product back? Or are there other dependencies before you think BNPL started? So just before you making this answer, I'll come back with second question.

No, it is not. Both are independent. It was rather the small credit issue that exists in the market, less than 50,000 credit. Due to that, and that is the only single KPI that materially matters to the lenders. There is no other KPIs related to wallet. We don't tag it on wallet either anyways, and we never.

Okay. So if there is a recovery in personal credit, both your PL and BNPL, trucks could come back?

100%. I mean I personally love the product. And I'm personally a champion of it, and like you said it, when the personal credit comes back, the BNPL will come back, we totally believe that it will come back.

Second question is on your lending business. What percent of disbursal will your largest partner account for? Rough number, what's the concentration?

It would be somewhere between 30% and 40%, and there is a reason for it. While we have a huge amount of lending capacity available with other lenders, especially the lenders who have joined in the last 6 or 9 months, who have done successful sort of scale up, up to a certain level, but have a lot more appetite, especially in merchant lending, majority of the business is repeat business. And in the case of repeat business, the partner who gave the first loan always has a ROFR and vast majority of repeat business, nearly 100% gets done by the same partner. So as a result, even though we have a huge amount of capacity available from other lenders, the same partner actually effectively ends up getting all the repeat business and then the new business is distributed based on various logic, such as which is a better fit, who has better conversions, better commercials, et cetera. So it does take time for the business to shift away. And that largest partner, I think you will get some indication of that also from our FLDG disclosure, that there is one partner who is very substantial in terms of their AUM on our platform.

And Pranav, I want to tell you that we personally have been pursuing other lenders who do not necessarily have appetite to do the, let's say, top-up, to release this ROFR so that we can allow another top-up loan to be given. And a couple of them even agreed. I'm personally very committed to continue to see even further deconcentration or hedging among multiple people. But rather this is more like that some champions have understood the product and they want to do even more versus many who have their own restrictions based on many, many of their own self reasons, may issue lesser amount. So it's less about capital availability. I can also tell you, I personally look at capital availability. Right now, we are disbursing 30%, 40% of capital availability.

Just to give you another sense, another way to answer that because I want to get you the exact number, is that this partner is largely in merchant lending. Our book with other partners in merchant lending over the last 9 months has grown significantly faster, obviously from a smaller base in each case than with this partner. So that shift -- it is shifting, but it happens gradually because of the repeat business -- repeat and top-up business nature of this.

Understood. Understood. Very clear. The last question is, I think circling back on the credit card acceptance. So irrespective of what you call it, POS, EDC or smarter Soundbox, would our number of devices accepting credit cards have increased in the last 1 year, especially after the restrictions on PPBL? And also have the economics changed versus what it was with the PPBL arrangement?

Yes. Actually, you pointed out towards the correct thing. The net payment margin is going to grow because of credit card, EMI and, let's say, loyalty point or any other high-margin processing payment instrument. We came from the behind on EMI, and we nearly took the top spot of processing EMI volumes in India. Then credit card wise, number of devices, yes, exactly, that is the reason that we continue to drive these acquiring. Surprisingly, all of our card acquiring machines are card acquiring. Along with that, our QRs are card acquiring because of RuPay credit card going on with QR. So it started to earn sizable revenue because RuPay credit card on UPI actually is MDR bearing even today.

I will just clarify. I think you mentioned something about margin. The margin is nearly identical between whether PPBL was acquiring or that partner banks who we are acquiring with right now. So the margins are not different at all.

Understood. Just to clarify, we had -- I think if you look at the RBI disclosures, PPBL had almost a 7%, 8% market share in what at least RBI calls as POS machines. Is it safe to assume that the market share has not declined since the last 12 to 18 months?

We increased that. So yes, safe to assume that it did not decline.

Good.

You have an eye, my friend.

[Audio Gap] Jayant Kharote from Axis Capital.

Congrats on delivering positive earnings to the whole team. First one is on this quarter's payments revenue. So if I look at the device addition, POS device addition has been pretty strong. And if the net payment margins are north of 3 bps, is there a decline in the yields for the devices Q-o-Q?

UPI volume is not accounted for any revenue until the time period final bonus is given or grant is accepted. So the yield looking less is not because of rental or any other thing or subscription fee that we charge from the merchant or any other thing. It is because growth of UPI effectively shows incrementally less bps payment processing because we only account for it in the quarter where we get the amount. So -- and UPI is growing.

I'll just add a couple of things to that. We also get the PIDF revenue, which is an incentive from the government. We also have certain incentives with our partner banks. So there are a couple of smaller, but if you're looking literally quarter-on-quarter and getting to smaller margins of error, then there are a few others, much smaller variables that also play. As a part of our overall subscription revenue per device, because we have become extremely efficient on CapEx and refurbishment, we are not looking to drive up subscription revenue per merchant necessarily. So we have very much moved towards what is the lifetime value of this portfolio, which is -- which includes a subscription revenue, it includes, for example, things obviously, these incentives, but also RuPay on UPI, and then also includes some attribution of the fact that some of these merchants can be upsold to merchant lending. So we look at it in the holistic context rather than trying to drive up a single number.

Actually, that leads into my second question. I was going to ask now that, do you see the POS market shares having stabilized between the few players? And does this now open up headroom for looking at price hikes on these products?

I like it. I personally want to tell you, internally, we did increase the price. And it worked out and sort of -- it's a funny thing. I mean, funny because internally, when my team pitched it because they said that we can try it, I was like, are you sure you would not see churn in the merchant? Then we found out that there is a reverse elasticity. By paying large -- because our products are far superior than competition in the market. Everybody else is a Chinese copy. Our hardware, software stack, et cetera, work out incredibly better. And that gives our product a premium level in the market. So some time, if you were charging $100, we're charging $129 now, and we are able to do it because the customer loves it. And the stability and robustness gives a premium to it. And in other words, I would not want to call that we are going to increase the price. I would rather go to say that we are continuing to expand and invest in the business. And I told the team, earn the business, revenue and profit, and expand to newer places, and they were able to do it. So no, not yet. And especially when there are 7 more players coming in this market. But at the same point in time, we did the elasticity check, my friend, and it was so positive and surprising.

Yes. I mean that explains that has gone through a couple of events over the last 2 years if the vintage has stuck around that ability to price it up should be there that -- but I get your point, you want to wait for a couple more quarters.

Yes, yes. I mean, obviously, 1 more year, our time will come.

Okay. The second question is slightly longer term, and most of the businesses have stabilized now, Vijay, whether it's lending or payments, there is a decent healthy linear growth here. But if I were to again push you towards any nonlinear variables there that can lift the revenues, so credit card on UPI, we discussed 4 quarters back, you had guided 5% of GMV, but it doesn't seem that the pace is going at that rate, maybe the issuance side. So anything else that you can call out that can introduce nonlinearity to the revenues?

Some of the consumer products, if you remember, we just talked about BNPL, we just talked about wallet. We just talked about many of those products. Those were non-linears. I mean those were getting incredible top line, bottom line, both. Once they start showing up, I'm going to tell you that, that linearity just changes the orbit to the next level and then continues next linear. And after that, we could think about newer product and technologies for our merchants. We have some of those being piloted as we speak. I'd rather speak once we see a sizable number. So yes, obviously, I mean, we are in it for long.

Is BNPL around the corner by any chance?

Sorry. It's not a question of BNPL around the corner, but my point was that there are line items that we have showcased in the past that have this dramatic peak. And like we just answered in a few minutes back, it is rather the [ INR 50,000 ] ticket loan kind of thing that is overhang on it.

And I should just also mention that it's anybody's guess about the next 6, 12 months. But we do feel that on, for example, consumer credit side, there's a little bit of a drag on the business, right? That business has seen much better days, and I'm not saying exactly we'll do exactly those volumes 6 or 12 months from now, but it does feel like -- and it's including in our conversations with partners that we are towards the bottom of what our potential is on that platform, and maybe 6 or 12 months from now, we'll be getting a lot more monetization out of that. The other thing that we have done is we have made this very much product-driven transacting user growth. So if you look at Paytm's product now versus a year ago, the app home page, for example, it's very, very much payments heavy and a lot of the things which might have been distracting users or it might have been cross-sell, upsell have been sort of deprioritized. So I think those things sort of -- and that is because of sort of where we were coming from a year, 1.5 years ago. And that is paying a lot of results, and I think we'll continue in that posture for a bit. But we are very disciplined about, if anything, it's okay to undermonetize the consumer side a little bit right now, but just make sure that the users are getting fantastic payment experience.

The next question is from Mr. Sameer Bhise from Dymon Asia.

Congrats on a strong set of numbers. So just wanted to ask in terms of this efficiency improvement journey, would you say that some of the low-hanging fruits have been taken and it is probably more difficult in terms of, say, expansion of EBITDA margin? Would that be a fair statement? Or you think some of the easy wins are still there on the table to take?

So I would say -- I'll just break up the question into two parts. So one is on the cost efficiency side. I would say like the -- if you will, as you described, is a low-hanging fruit, a lot of that we have done. So if you look at our indirect expenses, it's down very meaningfully from its peaks about 30%, 35% lower. Having said that, every time we pay more attention to it, there are things that we find where we can be more efficient. So it's not about doing less. It is just about just getting more efficient so that we can do more. So there might be a few more areas and there most likely are a few more areas. But I think the EBITDA margin expansion is going to come from the fact that this quarter, for example, we grew 31% on a like-for-like basis, 28% at headline number. We do think in future quarters, that number should be at least that much, if not higher. And we are a 60% contribution margin business. And there's no reason why indirect expenses should grow anywhere close to the revenue growth type of levels, not even perhaps half of that level. So now that we have 60% contribution margin, we have positive EBITDA, I think the jaws really open up as long as we stay disciplined on indirect expenses and continue to drive high-margin revenue.

So just kind of putting some of this math together, would it be fair to call that you could probably hit, say, early double-digit before the end of the financial year?

I don't want to give specific guidance for end of this financial year because that is obviously one does with quite a lot of sort of proactiveness when one is ready. But we do see significant improvements in EBITDA margin between now and the end of the year. We're currently at about 4%. That is like 4% just in the first quarter that you have hit profitability. So you can imagine that there's a lot of upside there.

[Operator Instructions] The next question is from Mr. Rahul Jain of Dolat Capital.

Some very strong execution. Most of the questions have been answered, but let me make an effort. We give this unique user data on the financial services side, it seems slightly volatile. Is it there a way to read the seasonality on this? Or you think there could be bigger stable pieces, which could be identified in a different count and there could be some smaller use cases where we see more volatility in the user base?

So I think you're referring to number of customers who availed financial services. We -- I think the historical trend is not seasonality as much as the fact that while we have seen growth in merchant loan, we have also seen a slight decrease in personal loan. We've also -- we're doing very well in Paytm Money on equity broking side. But as you know, market volumes are down because of certain industry regulatory events that took place second half of last year. So I think the commentary on that is that, hey, our revenue has doubled despite this number remaining slightly flat, right, which I think is sort of positive. On the other hand, I do understand that, that is not as helpful a metric for modeling as we may have initially expected it to be, right, because our revenue per financial services customer in a sense, has doubled. So like Vijay had said earlier, we'd love to get feedback on what could be useful other than loan disbursal volume, which we have sort of discontinued with -- we mentioned we discontinued 2, 3 quarters ago for the reasons that we mentioned earlier.

And another -- yes, just to ask a question that was previously asked, what could be the top 1 or 2 or 3 priorities for the company right now? Is it basically the execution? Or is it basically the reviving the lost revenue streams or it's more about new offering that we intend to venture into?

I think we've sort of called that out in terms of focus area -- excuse me, so merchant payments is disproportionately the focus. It's the core of the company, right? So merchant payments and across the span, right? So I know Paytm probably gets more headlines for smaller merchants and financial inclusion. But what we did want to call out this quarter also is that we cover the entire span, including enterprise merchants, both online and offline. So merchant payments is the core and there's a huge amount of growth possibilities there, there's a huge amount of innovation possible, and we are going to drive that, right? So in a sense, that is a big focus area. Vijay mentioned, wallet and BNPL earlier. And that is something which is not like a 1-month or 2-month thing, but that is something that we're actively working on. On financial services side, as all of you probably appreciate by now, merchant lending has been fantastic with our partners and really been a star. And we run that business very conservatively. But it just has enormous tailwinds, which we benefit from now that we have got the business model, right? And then on the personal loan and credit card side, we just kind of wait for the recovery, right? It's not one where we are going to push what -- try to be ahead of the recovery. We'll just wait for the recovery, and we have a very good product, and we think that should work well. So we've sort of listed out and I think internally, we're just super focused on AI, which is something that we have called out in this meeting. On every customer product and every internal process should be AI-first. And that's something which we're not seeing as sort of a thing that we're going to start to do. That has been the posture of the company internally for the last 1.5 years. And that's why we felt ready to start talking about it now.

The next question is from Ms. Grishma Shah of Envision Capital.

I want some color on the GMV growth for this quarter and how do you see panning out for the year? That's my first question.

Ma'am, I think if you notice, the GMV growth is driven by UPI adapting and expanding the merchant base. And lately, we've augmented our management team on online merchants because we already have had them onboarded for long. And by focusing on more farming, we hope to get even more growth. So all 3 buckets. Adding more merchants, farming the current online large merchants, and expanding of -- or expansion of UPI, or say merchant growing more. So we do continue to see that payment has 4, 5x growth left in this country from today.

The other question was on the MDR for large merchants, is there any clue or you could help us understand if it's some time away, it's still a long time away. What's the sense on this?

And we are as aware as you are. So no extra comment or input that we discovered. So we will go by what happens and gets informed. We are not basing our business on one hope of the future. We are rather committed to continue to drive profitable business even today.

The next question is from Mr. Vijit Jain of Citi.

Congratulations on a great set of numbers here. My first question, just on the financial services side. Wanted to understand first, is the number of customers that you provided, is that a unique number? Or is that -- would that include a single customer availing more services. And relatedly...

It's a unique number.

Got it. And relatedly, Madhur, would it make sense to provide also the number of transactions that actually happened under financial services bucket where you realized some revenue. And relatedly, you have mutual fund, stocks and loan distribution under that bucket. And the revenue incidence on each of them would be fairly disparate. Would it make sense to disclose the number of transactions under those broad categories for this quarter?

So the -- so just to clarify, mutual funds is not there. It's personal loan, merchant loan and equity broking and insurance. I think we separately would love to collate feedback on what would help -- what would be the simplest way for analysts to model financial services better. So we'll take this on board, and we'll engage with you to get some feedback on that, and then we'll also talk to other analysts. On how many products? So if you have 5.6 lakh customers who do financial services, number of products would be a single-digit percentage points higher. It will not be massively higher, right? So it's not like we focus on, hey, now that the person has taken a personal loan, we should try to sell them equity broking, right? So it is not really that journey. We have 3 -- or sorry, 4 separate high-ARPU products for us. They're not necessarily one linked to the other. So the overlap would be relatively small.

Also, Vijit, important thing to note, like Madhur said, it does not include mutual funds. So things like embedded insurance or mutual fund distribution, which are nonmaterial for number of amount of revenue or bottom line we generate. We have kept those numbers away from it, all because this is the material unique customer who have material revenue and bottom line.

Got it. Understood, Vijay. My second question on the EMI on devices bit, is this financial services distribution for you? Or will it be Payment Services?

Payments.

Okay. Regardless of which instrument is used?

It is an instrument used on device, and we are charging merchant for MDR and then passing them interchange. This is a payment revenue. It could include EMI or credit card, da, da, da.

I see. Got it. And a related question on the enterprise POS side, right? So from a market landscape point of view, is there -- I mean when I look at the various banks and who their POS partners are in the current system, of course, there are a number of players, some of them may still be on distributing old-school POS devices versus you guys who obviously have a software stack on top, a lot of instruments, a lot of capabilities, et cetera, right? So is that a big opportunity here, switching enterprises out of old-school devices which already show up in that RBI number into more modern devices? And within that, how do you do that given these are bank relationships currently from a go-to-market strategy?

Yes, I think there's a very large opportunity on card side still in the country. And obviously, there will be developments around UPI and card-on-UPI and then card as a form factor. So there'll be industry-level innovations as well. So I don't want to talk too far ahead. But let's say over the next 2, 3, 4, 5 years, we do think that there's opportunity for more card acceptance. However, we think that opportunity if -- the larger part of that opportunity is probably in taking these card machines a bit deeper. And for that, we need to have the payment gateway model that we have, we need to have a field suite. And for us, it ends up being an entire spectrum, right? So all the way from -- we still do paper QR as well, although that is becoming smaller and smaller. But paper QR, Soundbox, Card Soundbox and then Android card machines and then obviously online payment gateway and everything else. So I think the larger opportunity is probably in terms of taking this deeper. I'm sure there are some large, high-value merchants that still use -- still want a hardware upgrade or something of that nature, which is part of the reason why we have also started as a very small part of our business, partnering with banks and brands on what we call this POS provider model, but that we don't think is as attractive as a model overall.

I'd like to give some range number for this POS product, all because that our hardware, like you said, was light. And in a month, we should do significantly less than 10,000, but a little more than 5,000.

Okay. Got it. Perfect. And my last question here, on the personal loans distribution side right now, good to see that there was a decent 2 million quarter-on-quarter improvement in the MTU on the customer side. From a personal loan distribution recovery, how dependent from hereon, is that going to be on whether MTUs go back to somewhere around the previous levels? Or do you think that, that business can grow even on this existing base?

I rather believe that it will grow only on the existing base because it is better to have a vintage customer whose value that you had to accrue or have understanding on the platform, getting incremental customers and cross-selling them. And that too, UPI customers are very low-value customers, et cetera, et cetera. We've seen it in the past. So we are talking about our current MTU being way more than enough for the numbers.

And I think that's exactly right, which is that I think the personal -- the big change in personal loan, I think, is going to be -- actually it's cycle dependent, right? And like I said, anyone's guess on when that would be. But our partners tell us it's maybe 2, 3, 4 quarters away, right? And ultimately, it's their decision when they want to lend more. I think medium term, the fact that we are getting -- we're not just getting MTU increase, we are getting it partly because retention and engagement of customer is higher. So it's not -- so our MTU increase is not just because we are adding more customers that we are acquiring more customers. You can see our marketing cost is actually one of the lowest it has been in a long time. But what's driving the increase is retention higher, engagement higher. So in the medium term, we do think we'll have more customers who are eligible. But yes, next quarter whether this number goes to 7.5 or 7.8 or 7.9, I don't think we'll have any immediate impact on personal loan business.

Got it. And just last question on just switching to -- sticking on the same thing. In general, now that we've seen and you guys have seen a cycle in the industry on the personal loan side, is there any key fundamental way you think personal loans on online kind of changes when it comes back into recovery? Any significant big changes in how it will be done for the industry in general that you would highlight?

I would say how will it impact us in the future, how will we behave. I don't know what industry-wise. I don't actually know many other things about overall online industry distributing loan. I can definitely say that I would pursue personally us to do wealth or many of the businesses, which are not so cyclic even though wealth is a cyclic business or rather trading. But there is an opportunity to do a few more things. We basically are under-executed on financial services at large. That is what I will say.

We will take the last two questions of the day. The next question is from Mr. Sumeet Kariwala from Morgan Stanley.

I had a question with respect to the non-UPI GTV that has been obviously coming off in terms of contribution to overall GDP. Now if the RuPay credit card business is picking up, there's some activity on the EMI business, should we expect that to grow faster?

Faster is wrong word because of the very reason that there is still a finite number of people who have RuPay credit card, and that number is not very large because the common people are using more and more UPI. So it will grow very good, but faster between the two still will not be the case.

Then just one more question on the EMI financing business. Can you just talk about the product, how do you differentiate as compared to competition? What would be your market share, key brands that you work with, some more financial acumen, please.

So EMI is a product where the trick is that merchant and consumer needs many more parties to subvention. So one of the biggest differentiation in our product versus many others who have in the market, when we entered, we entered with this, that we have at least five parties that can subvention the cost of financing. And subvention meaning that in the moment of truth on a counter loan, the loan could be paid by, let's say, brand; number two, retailer; number three, the consumer; number four, the -- any other entity like platform, us can subvention further or even in the bank. So we are talking about every party can pay the subvention cost as one first and foremost change that we were able to bring in the market. Second is that because we work with so many banks, we are able to give that small shop in a small town an opportunity to give card offers. Typically, you would see these card offers come on large retailers like Vijay Sales or Croma or many other online merchant platforms. Small merchants do not get that. So we even added card offers, which was second differentiation. And card offers and for card-plus-EMI, both offers, I'm saying here. And third is because we work with brands with advertising also involved for them. So we were able to incentivize brands that you can advertise on our platform, give us the incentive for our customer or our machines or our customer sends for our merchants that they are driving your product sales. So three big differentiation. First of all, product. Like I said, more opportunities to get subvention or credit from. Second, more offers for the retailer from banks and financial institutions. And third, the brand has an advantage because we have a consumer app where we are able to cross-sell or give incentive to the brand to say, I'll give you this advertising in lieu if you give my merchant something more. So very, very differentiated. Nobody can match because these are sitting around on the differentiation of, we have a consumer, we have a technology, and we have a bank relationship anyways.

The next question is from Mr. Prateek Poddar.

Yes. Just two questions. One is when I see marketing -- revenue from marketing services. On a sequential basis, they are down, but your MTUs are up. How should I think about this? Given that you talked about engagement retention, et cetera, right, and the quality.

Sorry to interrupt. Just to be clear, first of all, quarter-on-quarter, you'll always see some shares. In this line of business, there is some seasonality. I'm not saying this quarter was specifically because of that. But I also refer to comments I made earlier, which is that on app experience, we, over the last 2 quarters, have made payments far more prominent, and non-payments' upsell for a large set of customers, far less prominent, because payments retention on the consumer side is something that we are driving as a priority, and that's starting to show in MTU. So the monetization of customers, especially new or medium -- live or medium engaged customers is going to come later. Of course, if a customer is a very heavy user and doesn't mind seeing a few ads or few upsell offers, then they will see that. So we're being far more selective. And so that's why we're saying payments redemption gives us long-term upsell opportunities, whereas it's not about what this quarter of marketing services revenue.

And one last line on this. Consumer are monetized when some advertisers, some marketeer, somebody who wants to reach out to them. So these two things will lead and lag any which ways.

Fair enough. Fair enough. And maybe just again, sequentially, when I see the merchant subscriptions and the new devices, which are being deployed, that number is lower versus what we did last quarter, despite higher cost of sales in terms of the sales network, et cetera, on a sequential basis again. I don't know whether that's the right way to look -- think about it, but just any...

It's not entirely -- I see where the question is coming from. Again, quarter-on-quarter, we'll have some aberrations. But we also, for example, did more device pickups than we had done in the previous quarter because that saves us a dramatic amount of CapEx. So the OpEx is significantly lower than the CapEx of the new device.

And you get to see a net number that is higher. So we may have deployed gross more and minus the net of the people who we have pick up. So while the numbers, absolute deployments are larger, we are reporting only the net.

Yes. And just to clarify, that's a double whammy on the number that you are looking at because as employees going and picking up a device. So a, I'm paying the cost for it; and b, I'm actually getting a negative device count for that.

But we'll continue to do it because we want more active merchants who are driving creditworthy growth.

Yes, I get it. And last question, Vijay, is there a way to not or to optimize this refurbishment cost or redeployment cost? You talked about so many AI platforms, et cetera. Is there something in the pipeline which can significantly give you far better efficiency?

Actually, if you noticed, we've especially shown the CapEx chart, so that it will look like that we are selling CapEx as rental or CapEx as payment revenue. That's an important line item that we definitely continuously want to say. And there, I know -- I mean we are becoming far more conservative in identifying it as a how many number of years we are going to see it active. So if you know, we charge the Soundbox in 1 year and -- 2 years, and EDC in 2 years.

EDC in 3 years.

EDC in 3 years, and Soundbox in 2 years. Now we wrote off a lot of these devices, which were more than 12 months old. And we didn't see transaction. So the answer is that we are becoming far more conservative on accounting. And additionally, here, we are thinking of creating even a longer term because longer term, meaning far more features are incrementally coming. Right now, we're going through that smartphone early age. You remember that there was always a new soundbox, new smartphone that was coming. I do see personally that there will be a time when the replacement requirement or the change requirement will get far lesser than current. So [Foreign Language] efficiency scope [Foreign Language].

I think if I could just add a couple of things. So one of the things that we have talked about in the past and we're doing is increase some of the features on the Soundbox. So that you are using the Soundbox, not just for payments, but for other things as well. So -- and this will be a journey, right? If you think about just to take Vijay's analogy, the first smartphone versus today's smartphone, you do many more types of things with that smartphone, right? So I'm not saying exactly as powerful, but I think that's the direction. So that increases retention and that reduces all the sort of downstream calls. The second is, without sort of giving away competitive secrets, we do dramatically more refurbishments than anybody else, even adjusted for relative scale because we manufacture these devices in India, refurbishment hubs and so on, right? Because we want to be extremely capital efficient here because that eventually goes back in the payback period math for the merchant, so we can price at a certain level. But if we have all of this working really well, then we can be more profitable at the same subscription revenue than our competitors. So we do want to drive down the sort of the cost of it or drive up the margin of it by being super-efficient. But of course, there's more one can do when you're running a business at this kind of scale. Then there's always operating efficiencies that you can drive, and we do quite a lot of that.

Okay. And just one last clarification. Look, if you had done DLG based disbursements, the contribution margins would have reduced, but the absolute contribution margin wouldn't have changed a lot. That's a fair understanding?

If we had done DLG, if, let's say, our largest partner had done all DLG versus not, then our revenue would be slightly higher but our direct cost would be meaningfully higher. So I'll again point to the direct cost last quarter as kind of the ballpark number. And the reason for that is if you go back to what we had said in the September quarter, then when you give DLG, you get all the DLG cost upfront, but then you have higher trail revenue. So when you flip it around and you're not giving DLG, then you don't have the cost that quarter. But for the disbursement that you did in this quarter, you have slightly less revenue over the next 5, 6 quarters. So you get the cost impact in this quarter whereas the revenue impact is distributed over time.

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's website subsequently. Thank you all for joining. You may now disconnect your lines.

Thank you so much, everyone. Have a good day.