New age cos learnt profitability key to market success the hard way: Siddharth Khemka

“Paytm had guided that they would turn adjusted EBITDA profitability by September of next financial year but they have done that two-three quarters ahead in time and they have given out a strong guidance in terms of the profitability for the future period. The focus remains on the business segments which would drive this profitability,” says Siddhartha Khemka, Head of Research, MOFSL.

What is your take on what is happening in Paytm and a couple of other new-age tech platforms? Is value emerging given that the founders have now become quite conscious with respect to profitability?
Yes I think the market has given a strong point to some of these new-age companies that profitability is the key for valuation and that we have seen across a spectrum of companies – the so-called consistent compounders. We have seen that the premium valuation for those companies have come down with the fall in growth.

The same goes with the new age companies. Profitability was the key. Paytm had guided that they would turn adjusted EBITDA profitability by September of next financial year but they have done that two-three quarters ahead in time and they have given out a strong guidance in terms of the profitability for the future period. The focus remains on the business segments which would drive this profitability.


Also, in terms of the cost, contribution margins have improved to 51% from 31%. They have focussed on reducing cost, the customer acquisition cost as well as the marketing spends. Overall that is a good trend for at least Paytm. Some of the other new-age companies will definitely have to wait and watch the margin trajectory, the profitability trajectory and once that is out, the market would react but definitely it is a good quarter from Paytm.