Fintech major Paytm on Monday reported 976% year-on-year (YoY) growth in its consolidated net profit at Rs 226 crore for the second quarter of FY27. The same stood at Rs 21 crore in the year-ago quarter. Revenue from operations in the reporting period rose 28% YoY to Rs 2,648 crore.

However, on a sequential basis, profit rose just 3% from Rs 220 crore posted in the preceding June quarter.

The sharp increase in reported profit was also helped by a lower exceptional charge. Paytm recorded exceptional expenses of Rs 4 crore during the September quarter, compared with Rs 190 crore a year earlier. Profit before exceptional items increased 9% to Rs 229 crore.

EBITDA for the quarter surged 90% to Rs 270 crore from Rs 142 crore a year earlier. The company's EBITDA margin improved to 10% from 7% in the year-ago quarter, reflecting higher revenue and improved operating leverage.

Paytm said its growing merchant network, expansion of financial services distribution and adoption of artificial intelligence across operations contributed to the improvement in profitability.

Revenue from the distribution of financial services rose 49% year-on-year to Rs 912 crore from Rs 611 crore, emerging as one of Paytm's fastest-growing businesses.

The company has been expanding its merchant and consumer loan distribution operations through partnerships with financial institutions.

Its number of key financial services customers increased 35% to 8.8 lakh from 6.5 lakh a year earlier. Repeat borrowers accounted for more than half of merchant loan disbursements.

Paytm said growth in merchant lending was supported by an expanding customer base eligible for loans, higher engagement and increasing participation from lending partners.

The company also reported improvement in its consumer lending operations, including personal loans and Paytm Postpaid, a credit line on UPI.

Paytm expects higher default loss guarantee (DLG) costs from the December quarter as it expands loan distribution under agreements with lending partners. However, the company expects EBITDA to continue improving despite these upfront expenses.

Revenue from payment services increased 25% year-on-year to Rs 1,434 crore from Rs 1,146 crore. Gross merchandise value (GMV), representing the total value of payments made to merchants through Paytm's platform, increased 26% to Rs 7.1 lakh crore from Rs 5.7 lakh crore.

The number of merchants paying for subscriptions, including payment devices, rose to 1.64 crore from 1.37 crore a year earlier, an addition of 27 lakh.

Net payment revenue stood at Rs 644 crore, an increase of 8% on a reported basis. Excluding Payments Infrastructure Development Fund incentives, comparable growth was 21%.

The company's payment processing margin remained above four basis points, supported by growth in merchant payment instruments that generate fees and improved pricing.

Paytm also reported its sixth consecutive quarter of market share gains in consumer payments. Monthly transacting users increased to 8.5 crore from 7.5 crore a year earlier.

The company's UPI gross transaction value grew 42%, compared with industry growth of 19%, according to figures cited by Paytm.

Paytm said a proposed merchant discount rate (MDR) on certain UPI transactions could provide additional revenue and profit opportunities.

The company referred to a recently notified framework for charges on select merchant UPI payments, with implementation expected after Diwali on a date yet to be announced.

Based on its existing payment mix, Paytm estimates the proposed charges could increase its overall payment processing margin by around 2.5 basis points.

The company said any additional revenue from UPI MDR would supplement its existing payments and financial services businesses.

Paytm's indirect expenses increased 14% YoY to Rs 1,209 crore, growing slower than its 28% revenue expansion.

Consequently, indirect expenses declined to 46% of revenue from 52% a year earlier.

The company said AI-driven productivity improvements were helping it manage customer acquisition, servicing, fraud prevention and operational costs. Revenue from marketing services increased 26% to Rs 287 crore from Rs 228 crore.