“In lending, we believe the revenue potential in five years could be over Rs 3,000 crore, provided that there are no asset-quality hiccups,” the global research house said. “[However] given that digital lending in India is very nascent, it is hard to say whether it will scale up well.”
“We forecast cloud revenue to double to Rs 1,400 crore over FY22-25 driven by increasing advertising revenue coupled with higher credit card sourcing income,” it said, adding that Paytm’s co-branded credit cards with HDFC Bank Ltd. and SBI Cards and Payment Services Ltd. also have “potential to scale up”.
Over the past two years, Paytm’s net take-rate, or commission, has gone from zero to 13 basis points. This is because it has been able to negotiate lower processing fees and offer its “Soundbox” to 50 lakh merchants. However, further meaningful expansion of take-rates would be difficult given the competition for Soundbox from PhonePe and the increasing share of UPI transactions, which have zero commissions, the research house said.
While raising concerns about Paytm’s large fixed cost structure of around Rs 4,600 crore annually, CLSA said, “Paytm needs to somehow curtail fixed costs — a 10% cut in fixed costs could result in a 25% core Ebitda upgrade for FY27.”