It’s been a curious past year for Paytm. Even as the fintech giant has shown improved financial performance on paper over the past two quarters, the real picture lies between the lines.

Let’s take the Q3 numbers, for instance: Paytm narrowed its net loss by 6% on a YoY basis to INR 208.5 Cr in the quarter ending December 2024 (Q3 FY25), but revenue from operations declined by 36% to INR 1,827.8 Cr compared to Q3 FY24.

Even though Paytm managed to reduce its indirect expenses by roughly 7.5% to INR 1,000 Cr in Q3, direct costs grew by 13% on a QoQ basis. In contrast, on a sequential basis, revenue grew at a slower rate of 10% from INR 1,659 Cr.

This indicates that the revenue growth has come as a result of higher spending on payments processing charges, cashback and incentive costs and other direct expenses. In fact, much of this spending has gone towards reclaiming the market share lost after the RBI action on Paytm Payments Bank.

In the meanwhile, the competition has caught up to Paytm in terms of revenue and we can expect an intense battle in the year ahead from the cohort of super apps in India. From PhonePe to CRED to Flipkart-backed Super.Money, Navi and others, a number of fintech heavyweights have looked to capture Paytm’s lost market share in UPI, personal and merchant loans, merchant services and even digital commerce.

These companies are building from a position of strength in many cases, whereas Paytm is looking to revive its brand and flywheel after the setback over the past year. How far behind is Paytm today?

Paytm Picks Profitability Over Growth

Outside the quarter-on-quarter comparison, it must be noted that Paytm has consistently reduced expenses on a YoY basis in FY25 in line with slow growth guidance after the RBI action on Paytm Payments Bank. This has resulted in improved profitability, but at the expense of revenue and customer growth.

Maintaining this profitability will be a huge challenge for Paytm, especially because future payments revenue growth is highly dependent on sales employees.

Even though the company hired close to 2,000 sales employees between September and December 2024, the overall costs for sales employees have fallen marginally in the quarter.

For instance, overall employee cost (excluding ESOPs) fell by 6% QoQ and 29% YoY to INR 575 Cr. Employee costs in FY25 (April to December) fell by INR 451 Cr compared to the same period in FY24, in line with Paytm’s guidance in January 2024 of having to cut employee costs by INR 400 Cr – INR 500 Cr.

Even non-sales employee costs — business, operations, technology and support roles — fell by 11% QoQ and 36% YoY, Paytm said, on the back of AI adoption for improving productivity across businesses.

The clear indication is that Paytm’s salaries and incentives for its........

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