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India's leading payment and financial services distribution company Paytm has something to cheer about from research firm Macquarie report.
Following the Q4 FY24 results, Macquarie observed that Paytm's loan disbursement has rebound to Rs 20 billion in April 2024 after plummeting to Rs 9 billion in February 2024, due to regulatory directives on its associate entity. The report says "Clearly profitability is under severe pressure due to impact coming from RBI regulations. However, the good part is that, as per management disclosures, loan disbursals after having plummeted to Rs9bn in Feb-2024, have now increased to Rs20bn as of April 2024. For PayTM's survivability, it requires strong support from the lending ecosystem and this remains a key monitorable in our view" Paytm achieved 48% growth year-on-year in its loan distribution business reaching Rs 52,390 Cr in FY24. The company is putting its focus behind the distribution-only business model from the previous distribution plus collection incentives model, and expects to take rates to stabilize around 3-3.5% in the long term, the report noted. In its earnings release, the company noted that the distribution-only loans have continued to scale well, while it has added more lending partners during the quarter, including pilots with banks. "This type of loan contributed the vast majority of consumer loans this quarter, and is our key focus as it has a bigger Total Addressable Market (TAM), wider interest from large banks and non-banks, easier tech integration and more regulatory clarity," the company said. In view of industry data suggesting deterioration of asset quality for personal loans, the company is targeting prime and super prime category customers, and offering them a better user experience and competitive interest rates. This segment of borrowers is more price-sensitive, which could result in lower take rates (as a % of disbursal value) for Paytm. Speaking about Merchant Loans, Paytm's group CFO Madhur Deora said, "The (loan) segment has seen immense recovery since January. If we identify any concerns about potential asset quality deterioration, we take a conservative approach. We remain focused on asset quality." By successfully migrating its core payment business from PPBL to other partner banks, the company expects to reduce risks in its business model and create new long-term monetization opportunities by leveraging the platform's strong customer and merchant engagement. (ANI)
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