The First Profitable Quarter, Against the Weakest Comparison Point Available
One97 Communications reported a net profit of Rs. 123 crore for Q1 FY2026 (quarter ended June 30, 2025) - the first profitable quarter in the company's history as a listed entity, four years after its November 2021 IPO. Revenue from Operations grew 28% year-on-year to Rs. 1,918 crore, Contribution Profit» rose 52% YoY to Rs. 1,151 crore at a 60% margin, and EBITDA» swung from a Rs. 792 crore loss to a Rs. 72 crore profit.
Every one of those year-on-year comparisons, though, is measured against Q1 FY2025 (April-June 2024) - the single worst quarter in this company's recent history, sitting right in the aftermath of the January 31, 2024 Reserve Bank of India action against Paytm Payments Bank. Revenue that quarter had already collapsed to Rs. 1,502 crore and EBITDA Before ESOP» was a Rs. 545 crore loss, before the cost cuts covered in last quarter's post had taken effect. Comparing this quarter's real, current-state numbers against that trough makes the YoY swing look more dramatic than the underlying trend actually is. The more honest comparison is sequential: Contribution Profit rose a real but far less dramatic 7% quarter-on-quarter, and EBITDA Before ESOP improved 26% QoQ (from Rs. 81 crore to Rs. 102 crore) - still genuine progress, just not the "swung from a Rs. 545 crore loss to a Rs. 102 crore profit" story the YoY column implies.
The Prescription
Paytm should keep pushing the same lever that's actually driving this quarter's improvement: shrinking its own credit-risk exposure inside its lending-distribution business. CFO Madhur Deora told analysts on the call that the assets under management on which Paytm carries a Default Loss Guarantee» (DLG) - where Paytm itself absorbs a share of default losses, rather than the lending partner alone - are down more than 40% from a year ago, even as total loan distribution volume holds up. That's a company deliberately trading some near-term revenue for materially less balance-sheet-adjacent risk, which is the right call for a business that doesn't actually book loans on its own books and shouldn't be carrying loan-book-like risk without a bank's capital cushion behind it.
What Paytm should stop doing is treating cost discipline as interchangeable with genuine operating leverage on the core payments business. Employee cost (excluding ESOP) fell 13% YoY, marketing spend fell 65% YoY, and indirect expenses overall fell 19% YoY - all real, but a company can only cut its way to profitability once. Revenue from the core Payment Services line actually grew a modest 18% YoY to Rs. 1,044 crore, well behind the 52% Contribution Profit growth rate and the 100% growth in Distribution of Financial Services revenue - meaning this quarter's profit swing is disproportionately a cost story and a lending-distribution-mix story, not yet a core-payments-reacceleration story. The next real test is whether Payment Services revenue growth itself picks up, not just whether costs stay low.
Key Financial Metrics
Q1 FY2026 (quarter ended June 30, 2025) vs. Q1 FY2025 (quarter ended June 30, 2024) and Q4 FY2025 (quarter ended March 31, 2025), consolidated, unaudited
FX: Rs. 85.71 = $1 (June 30, 2025 close). Year-ago and prior-quarter columns are in rupees only.
| Metric | Q1 FY26 (Rs. Cr) | Q1 FY26 (USD) | Q1 FY25 (Rs. Cr) | YoY | Q4 FY25 (Rs. Cr) | QoQ |
|---|---|---|---|---|---|---|
| Revenue from Operations | 1,918 | ~$223.8M | 1,502 | ✅ +28%¹ | 1,911 | ✅ +0.4% |
| Contribution Profit | 1,151 | ~$134.3M | 755 | ✅ +52%¹ | 1,071 | ✅ +7% |
| EBITDA Before ESOP Cost | 102 | ~$11.9M | (545) | ✅ Swung to profit¹ | 81 | ✅ +26% |
| EBITDA (incl. ESOP cost) | 72 | ~$8.4M | (792) | ✅ Swung to profit¹ | (88) | ✅ Swung to profit |
| Operating Income (loss)² | 143 | ~$16.7M | (658) | ✅ Swung to profit¹ | (18) | ✅ Swung to profit |
| Net Income | 123 | ~$14.4M | (840) | ✅ Swung to profit¹ | (545) | ✅ Swung to profit |
| Total Cash & Investable Balance (excl. customer/merchant funds) | 12,872 | ~$1,502.0M | 8,108 | ✅ +59% | 12,809 | ✅ +0.5% |
¹ Every YoY comparison in this table is against the trough quarter immediately following the PPBL shutdown (see The Real Story above) - treat the magnitude of these YoY swings with that base effect in mind; the QoQ columns are the more reliable read on current momentum. ² Computed as EBITDA less finance costs and depreciation, plus other income and JV share, before exceptional items and tax - the closest available line to a genuine pre-exceptional operating result. Free cash flow isn't shown this quarter: like most interim quarters, this filing has no standalone quarterly cash-flow statement, and FY2026's first half-year figure isn't yet complete.
This is Paytm's cleanest quarter as a public company by every metric in this table - real revenue growth, genuine margin expansion, and its first-ever GAAP profit. The QoQ columns confirm the improvement is continuing, not just a base-effect illusion: Contribution Profit, EBITDA, and net income all improved sequentially too, just at a more modest pace than the YoY column suggests.
Key Operational Metrics
| Metric | Q1 FY26 | Q1 FY25 | YoY |
|---|---|---|---|
| GMV | Rs. 5.4 lakh Cr (~$63.0B) | Rs. 4.3 lakh Cr (~$50.2B) | ✅ +27% |
| Registered Merchants (cumulative) | 4.5 Cr | 4.1 Cr | ✅ +11% |
| Subscription Merchants incl. devices (cumulative) | 1.30 Cr | 1.09 Cr | ✅ +20% |
| MTU (average) | 7.4 Cr | 7.8 Cr | ⚠️ -6% |
| Key Financial Services Customers | 5.6 lakh | 5.9 lakh | ⚠️ -4% |
GMV and merchant-side metrics are growing at a healthy clip, but MTU and financial-services customer counts are still shrinking, even against the already-depressed Q1 FY2025 base - a full year and a half after the PPBL action, Paytm still hasn't returned to consumer-side growth on either metric. Management didn't disclose a value-of-loans-distributed figure this quarter, having replaced it with "key financial services customers" starting last quarter (see prior post); indicative lending-quality metrics (Bucket-1 30-day resolution of 83-90% and an assumed Expected Credit Loss» of 4.5-5.0% on merchant loans) were held roughly flat from last quarter.
Payment Services, Distribution of Financial Services, and Marketing Services
- Payment Services (Rs. 1,044 Cr, 54% of revenue, +18% YoY, -0.2% QoQ): the slowest-growing of the three lines, and effectively flat sequentially - the part of the business still furthest from a genuine reacceleration.
- Distribution of Financial Services (Rs. 561 Cr, 29% of revenue, +100% YoY, +3% QoQ): now formally renamed from "Financial Services and Others" (the label used as recently as last quarter) - the third rename of this segment's label since this blog started covering the company, worth noting as a recurring disclosure-consistency issue even though the underlying business is genuinely growing.
- Marketing Services (Rs. 247 Cr, 13% of revenue, -23% YoY, -7% QoQ): still declining on both bases, continuing the post-PPBL advertiser-base contraction flagged last quarter.
Segment Comparison
| Segment | Q1 FY26 (Rs. Cr) | Q1 FY25 (Rs. Cr) | YoY | Share of Revenue |
|---|---|---|---|---|
| Payment Services | 1,044 | 884 | ✅ +18% | 54% |
| Distribution of Financial Services | 561 | 280 | ✅ +100% | 29% |
| Marketing Services | 247 | 321 | ⚠️ -23% | 13% |
| Other Operating Revenue | 67 | 16 | ✅ +319% | 4% |
| Revenue from Operations | 1,918 | 1,502 | +28% | 100% |
Distribution of Financial Services doubling YoY, on top of the 79% growth this line posted last quarter, confirms lending distribution is now the structural growth engine of this business, not a one-quarter blip - its share of total revenue has risen from roughly 19% two quarters ago to 29% now. Payment Services growing only 18% while carrying more than half of revenue is the more important number for anyone assessing whether Paytm's core payments moat is actually reaccelerating or just riding the lending line higher.
Beyond the Usual
Management formally retired every "before ESOP" metric it has reported since 2021
Founder and CEO Vijay Shekhar Sharma told analysts directly on the call: "we have pruned out every word which included EBITDA before ESOP, PAT before ESOP, or anything before ESOP. Next quarter onward, we will stop giving the ESOP line, and it will be only the employee cost... no more adjusted anything." This is a genuinely welcome development given this blog's repeated criticism of the metric - first raised in the Q3 FY2022 post and again in last quarter's post - though it's worth noting the retirement comes only after the ESOP charge itself shrank dramatically following the CEO's own option forfeiture (see last quarter's post), which made the adjusted metric far less flattering to exclude from in the first place.
The company is deliberately shrinking its own credit-risk exposure inside lending distribution
CFO Madhur Deora disclosed on the call that assets under management carrying a Default Loss Guarantee are down more than 40% year-on-year, even as total loan-distribution volume has held up - meaning Paytm is choosing distribution arrangements where its lending partners bear more of the default risk themselves, rather than chasing volume that requires Paytm to backstop losses. This is a genuinely interesting risk-management choice a reader wouldn't see just from the reported revenue and contribution-margin numbers, and it's consistent with a company still recovering credibility with lending partners after the PPBL episode.
The company's General Counsel replaces its CFO on the board, in a quarter with several governance handoffs already in motion
CFO Madhur Deora is not seeking reappointment to the board this quarter, to be replaced by the company's General Counsel as executive director - a move both he and Sharma framed on the call as freeing Deora's time for operating priorities rather than board governance. Combined with the CEO's own recent ESOP forfeiture (see last quarter's post) and the ongoing SEBI settlement discussion tied to that same grant, this is the second consecutive quarter with a material change to how the company's senior leadership is structured or compensated - worth tracking as a pattern rather than a one-off.
What Management Chose to Emphasize on the Call
Beyond retiring the adjusted-EBITDA framing (see Beyond the Usual above), Sharma and Deora used the call to reiterate the same medium-term targets given in prior quarters - 30-35% revenue growth and 15-20% EBITDA margins over the next two to three years - with Deora specifically arguing this is "more achievable today than even a few quarters ago" because contribution margin strength gives room to invest in growth while still expanding EBITDA. Neither the FGTPL GST show-cause notice nor the FEMA matter flagged in last quarter's Beyond the Usual came up in the Q&A portion of this call.
Target Valuation Range
EV/Sales-implied enterprise value: approximately Rs. 46,079 crore (~6.0x annualized revenue). Verdict: still too early for a real DCF, but the peer-multiple math has re-rated up meaningfully from last quarter as the market rewards the first profitable quarter.
| Market cap → enterprise value | Q1 FY2026 (Jun 2025) |
|---|---|
| Share price (period-end) | Rs. 924.00 |
| Shares outstanding | 638,000,000 |
| Market capitalization | Rs. 58,951 crore (~$6.88B) |
| Less: cash and investable balances (ex. customer/merchant funds) | Rs. 12,872 crore |
| Enterprise value | Rs. 46,079 crore (~$5.38B) |
| Peer-multiple sanity check | Q4 FY2025 (Mar 2025) | Q1 FY2026 (Jun 2025) |
|---|---|---|
| Revenue (full-year / annualized) | Rs. 6,900 crore | Rs. 7,672 crore |
| Enterprise value | Rs. 37,179 crore (~$4.35B) | Rs. 46,079 crore (~$5.38B) |
| EV/Sales | ~5.4x | ~6.0x |
Up, consistent with the stock's rally from Rs. 783 to Rs. 924 over the quarter. A full DCF remains premature: one profitable quarter, on a base-effect-flattered YoY comparison (see above), isn't yet enough of a track record to project multi-year free cash flow with any real confidence - the next few quarters of QoQ trend, not this single result, will determine whether 6.0x looks cheap or expensive in hindsight.
One97 Communications Limited's earnings release, earnings presentation, and unaudited consolidated/standalone financial results for the quarter ended June 30, 2025, and the transcript of the company's earnings call held July 22, 2025.