One97 Communications reported a 79% rise in June quarter net profit to ₹220 crore with revenue up 28%. Despite the strong earnings, the stock dipped 1% as investors weighed the company's efforts to regain its digital wallet license through a new RBI application.
Detailed Coverage
One97 Communications Ltd, the parent company of Paytm, reported a strong June quarter on Tuesday, showing a 79% year-on-year surge in consolidated net profit to ₹220 crore. Revenue from operations also saw a healthy growth of 28%, reaching ₹2,448 crore for the quarter ending June 30. Despite these gains, the stock saw a minor decline of nearly 1% in early trading sessions.
The company’s operational metrics showed steady expansion during the period. Merchant Gross Merchandise Value, which tracks the total value of payments processed through its platform, rose by 31% to ₹7.1 lakh crore. Meanwhile, customer UPI transactions increased by 45% to ₹5.9 lakh crore. The company also expanded its reach, reaching 8 crore monthly transacting users and increasing its payment device network to 1.57 crore merchants.
License Application and Future Strategy
A significant part of the company’s future strategy involves the potential revival of its digital wallet business. Its subsidiary, Paytm Payments Services Ltd, has submitted an application to the Reserve Bank of India (RBI) for a Prepaid Payment Instrument (PPI) license. If approved, this would allow Paytm to offer wallet services directly through its own subsidiary rather than relying on partner banks. This move follows the earlier cancellation of its payments bank license, which had significantly impacted its digital payment ecosystem.
Financial Context and Analyst Views
The company's performance has drawn varying reactions from market analysts. Brokerage firm Citi maintained a positive outlook, noting that the EBITDA of ₹200 crore beat expectations due to better management of cloud costs and growth in merchant loan distribution. However, Citi also pointed out that payment margins are facing pressure due to higher costs related to device rentals. In contrast, CLSA maintained an underperform rating, suggesting that the recent price movement already accounts for much of the optimism surrounding the company's recovery.
For investors, the primary monitorable will be the progress of the PPI license application with the RBI. The company’s ability to manage its payment margins while scaling up its merchant loan distribution and payment device network will also remain crucial to its long-term financial health. Investors may keep track of management commentary regarding the regulatory timeline and the expected timeline for the wallet services to become operational again.