A lot of articles flying around One97 Communication (PayTM) as a good equity bet in the long term.
While I’m one of those hurt-by-the-IPO investors of Paytm, I’ve married the stock, still.
This is no recommendation to buy, hold, or exit the stock - but just a deep dive into ONE arm of the business - the most recent one, Paytm’s lending business.
Yep, the personal loan one!
Think of Paytm's lending like a magic button. Press it, and poof! - they connect people who need money with those who have it to lend.
But here's the catch: Paytm isn't the one lending the money. They're like the friend who introduces you to someone cool at a party. 🎉
Like, you apply on Paytm, but you get the loan from, say, HDFC Bank. But no brownie points for guessing who earns out of it, because of the Platform-as-a-Service it provides!
Paytm works with a large group of over 30 million merchants. This gives them a big opportunity to offer digital loans. They help big financial companies give out small loans to people and businesses.
How does Paytm earn from this:
Upfront fees: Paytm charges a fee to lenders for each loan that it disburses. This fee is typically a percentage of the loan amount, generally between 2.5% - 3.5%
Collection income: When you pay back, Paytm gets a tiny slice of the pie, anywhere between 0.5% - 1.5%.
In just one quarter - Q4FY23, Paytm gave out loans totaling ₹12,554 Cr.
Now here’s the interesting calculation - If we estimate their profit from these loans (the difference between what they earn in interest and what they pay out) to be between 3 to 5% of the loan amount, they'd make around ₹380 Cr. This profit, as explained above - is split between an initial 2.5% to 3.5% and a later 0.5% to 1.5% when collecting repayments.
Remember those old ₹100 & ₹500 coupons that you used Paytm for, actually?
Looks like Paytm is vasooling that easily, but only in bigger chunks!
In Q4FY23, Paytm gave out loans totaling ₹12,554 Cr, and netted an estimated profit of about ₹380 Cr!!!
If you're considering taking out a loan, the process with Paytm is as straightforward as placing a pizza order on a relaxed Friday evening; a couple of clicks on their app and you're good to go. In terms of speed, Paytm sets the gold standard. Once your loan is approved, the funds swiftly make their way to your account. And the best part? Paytm welcomes everyone with open arms, ensuring that even those who might have been overlooked by traditional banks have a place to turn to.
Bonus Info: Paytm's not just about loans. They're also the cool kids helping other businesses shine with their marketing services. And those co-branded credit cards with SBI and HDFC - They're like the VIP passes to the Paytm party. As of September 2022, about 3 lakh party-goers flaunted these cards, spending an average of ₹22,000 – ₹24,000 monthly. And the party just keeps growing!
Disclaimer: This post is for educational purposes only & I am not a SEBI regd. financial advisor. Kindly do your own research before taking investment/trading decisions.
Feel free to reach out to me for any queries, suggestions, or just a quick chat!
Till then, stay safe, stay invested!
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