Thread by @jshilanjanm

As @Paytm released its Q4FY23 results yday, I dived into last 8-qtrs of its lending biz 💡💡

Here’s a breakdown of numbers that you won’t find all in one place anywhere else 👇

Tags: @vijayshekhar | #Paytm

Paytm earns 2 things on each loan given.

💰 Commission (C): A %age of the loan amount

💰 Performance bonus (PB): A %age of the EMIs collected, only when the loan is paid back

Some basics about the performance bonus!

👉 In case of defaults, #Fintechs used to compensate the lending partners (LPs- NBFCs & banks) under #FLDG (first loan default guarantee) agreement

👉 However, RBI was unhappy, as it geared LPs to give credit with relaxed norms. Thus, it banned FLDG partnerships!

👉 Now, LPs needed comfort as fintechs mostly brought in 1st-time borrowers w/o a credit history. Without a solution, loans won’t happen

👉 Thus they brought down the overall commissions paid & introduced a performance bonus (PB) issued when all EMIs have been paid. They like to call it “Loan Collection Fee”. This way, banks don’t pay much to fintechs if defaults happen. It’s FLDG reverse-engineered. Intelligent😅

All that said, let’s dive into Paytm’s 3 lending products!

(BRACKETS denote the wtd avg QoQ growth rate for last 8-qtrs.)

BNPL (Postpaid) 👇

No. of users: ~80L
Total lending to date: Rs 25k cr
Q4FY23 disbursals: Rs 6.8k cr (27%)
Avg loan size: Rs 5.9k (13%)
No. of loans: 5.6 cr (12%)

Paytm earns ~2.5% C & ~0.75% PB 💰

Main takeaway: ~80L users have taken 5.6cr BNPL loans. Means, an avg user has used BNPL for at least 7 months now! 👏👏

Personal Loans 👇

No. of users: ~6L
Total lending to date: Rs 12k cr
Q4FY23 disbursals: Rs 3.5k cr (33%)
Avg loan size: Rs 1.3L (8%)
No. of loans: 10.4L (24%)

Paytm earns ~3% C & ~1% PB 💰

Main takeaway: 10.4L loans to ~6L users Means, 40%+ repeat borrowers- That’s amazing! As more people complete one loan & come back for another, biz will need lesser marketing 👏👏

Merchant Loans 👇

Total lending to date: Rs 8k cr
Q4FY23 disbursals: Rs 2.3k cr (38% QoQ)
Avg loan size: Rs 1.7L (7% QoQ)
No. of loans: 5.6L (29% QoQ)

Paytm earns ~3.5% C & ~1.5% PB 💰

Main takeaway: No. & value of loans growing mush faster than BNPL, and also Personal loans. This is good news, as Paytm earns way more on each Merchant loan disbursed! 👏👏

Broader takeaways 👇

👏 Growing avg loan size for all 3 show higher usage with time for respective users

👏 As nos. show, every underlying metric for each of the 3 products is doing damn good

👏 More importantly, the products on which Paytm earns, are also growing much faster

Given its multiple biz verticals, people don’t know much about Paytm’s superb lending biz. Hope, this helps change that 🙏

(Disc: Invested)

Biz News+ WA group: bit.ly/3HFCaVT

PS: I post one such deep-dive daily 11am. If interested, do follow! Note: This is a personal #investment thesis & not a #stock / #stockmarket rec

Tags: #IndianStocks #Startups #IndianStartups #Paytm #PhonePe