Paytm’s Payments Story Is Solid, but the Communication Is Not

One 97 Communications, the company that operates Paytm, the ubiquitous payments service provider, did not lose investor confidence in the July-September quarter because of weak numbers. It lost it because it chose to perform before it chose to explain.

Analysts on the company’s earnings conference call came in looking for comfort on cash flow and clarity on how the company intended to get its house in order. They were met instead with a format change, AI demos, and a future pitched ahead of a present that remained unresolved. It appeared the company had forgotten the basic rule of investor communication that investors are fine with big plans but lose patience when the basics are unclear.

On the surface, the quarter had plenty to like. Payment processing margins improved, helped by a richer mix of credit cards and EMIs. The management argued that the trend was broadly sustainable, even if festive-season EMI volumes provided a temporary boost. Operating revenue rose, contribution margins held up, and the reset narrative that had taken shape earlier in the year did not unravel.

Yet the most important moment on the call had nothing to do with AI or margins. It was about cash.

An analyst pointed out that the gap between operating cash flow before and after working capital had widened sharply, running into “hundreds of crores” even after accounting for the ₹1.9 billion write-off for the gaming business. The management responded that Paytm pays merchants daily, including on the last day of the quarter, while inflows from some payment methods like credit cards arrive only on the next working day. So, if the quarter ends on a weekend or a holiday, more cash flows out before it comes in, making the reported cash flow appear weak. Because the exact numbers depend on settlement dates and instruments, the management offered to walk investors through the detailed cash flows privately after the call.

That could have been the moment when confidence cracked. When a payments company cannot clearly walk investors through its cash numbers on the call, nerves fray quickly.

A similar tension ran through the discussion on Postpaid, the company’s short-term digital credit line that lets users “spend now and pay next month”. The management positioned it as a fee-based, pay-next-month product rather than revolving credit, designed to sit closer to payments than lending. That may be strategically sensible in a cautious credit environment. But analysts immediately sought details on unit economics, pricing flexibility, and how it truly differed from the earlier Buy Now Pay Later product that the management had once described as “fantastic”.

These questions were attempts to understand whether Paytm’s expanding product set is becoming more model-friendly or less. They also exposed a communication gap that the management could have handled better.

AI only amplified the problem. The One 97’s management was explicit that AI is not just a cost lever but also a future revenue stream, potentially emerging as a commerce cloud offering with subscriptions and usage-based charges. The vision may prove right, but in the absence of numbers such as attach rates—the percentage of existing customers who take a specific add-on product or feature—or early revenue contributions, investors are being asked to trust the story rather than test the model.

Big revenue stories need numbers first, not later. Here, the order was reversed. Paytm has cleared the survival test. That is no longer the market’s concern. The company is no longer being judged on whether it can stay afloat, but on whether it can manage narrative load in a regulated, cash-sensitive business.

If Paytm wants investors to price an AI layer on top of its payments business, it must first make the payments story boring again. Investors needed a clear walk-through of the cash numbers, not a rain check on the call and a promise to circle back later. Until the cash flow is as plain as the AI pitch is glossy, the market will struggle to take the company’s intended message at face value.