India's Paytm Sept net loss widens, says maintains growth momentum

By Sankalp Phartiyal and Nupur Anand

NEW DELHI, Nov 27 (Reuters) - India's One 97 Communications Ltd PAYT.NS , the parent of fintech firm Paytm, said on Saturday its net loss for the three months through September widened by 8.4% as expenses rose.

Paytm, reporting its earnings publicly for the first time since this month's stock market debut Link reported a consolidated net loss of 4.74 billion rupees ($63.2 million) compared with 4.37 billion rupees in the same period a year earlier.

Revenue rose 49.7% to 11.35 billion rupees.

"We have maintained the growth momentum in our payments services business, expanded our financial services business aggressively and are on our way to pre-COVID volumes for Commerce and Cloud services," Paytm said in a statement.

Paytm, which counts China's Ant Group and Japan's SoftBank Group Corp 9984.T among its backers, raised $2.5 billion this month in India's biggest initial public offering (IPO), but made a dismal debut on the stock exchanges last week.

The stock has recouped some of its losses but remains 17% below its issue price.

"Paytm faces stiff challenges in its customer acquisition engine, which would slow down its revenue growth in the core payments business," brokerage JM Financial said in a note to clients a day ahead of Paytm's earnings. "We find valuations rich and the path to profitability fraught with high execution risks in context."

The company said its gross merchandise value from transactions other than a state-backed peer-to-peer payments network, popularly called UPI, grew 52% in the quarter from a year earlier.

Paytm competes with Google GOOGL.O and Walmart Inc's WMT.N PhonePe in India's digital-payments market, and all of these companies offer peer-to-peer payments on UPI.

The company said it was "well funded" with a cash equivalent and investable balance of 110 billion rupees including through the IPO.

Founder and chief executive Vijay Shekhar Sharma has said investors will need time to understand the company's business.

"Some of the line items in our payment business are not just profit generating but free cash flow generating," Sharma said in a call for investors. "Our revenues and contribution margins are growing on the back of payment and financial services business where payment itself is the primary driver."

Its commerce, cloud and financial services businesses had huge potential to make more money for the company, Madhur Deora, Paytm's group chief financial officer said.

Paytm had a "tremendous opportunity to grow payments" as a means to acquire more customers and merchants, Sharma added.

Founded in 2010 as a platform for adding credit to mobile phones, Paytm grew rapidly after U.S. ride-hailing firm Uber Technologies Inc UBER.N listed it as a quick payment option in India. Its use jumped in 2016 when India suddenly banned high-value currency notes, boosting digital payments.

Paytm, headquartered on the outskirts of capital New Delhi, offers services including merchant payments, insurance and gold sales, movie and flight ticketing, and bank deposits and remittance.

($1 = 75.0400 Indian rupees)

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Reporting by Sankalp Phartiyal and Nupur Anand
Editing by William Mallard and Mark Potter

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