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Mint
4 days ago
- Business
- Mint
Why QED-backed Leo1 needs a sharp turnaround to stabilise its ship
Mumbai: QED-backed edu-fintech Leo1 is making sweeping cutbacks as it pivots away from its core lending business, seeking to stabilise operations and grow in new segments, according to multiple people familiar with the matter. The company has undertaken significant rationalisation, shutting down its first loss default guarantee or FLDG model, scaling back underperforming business lines, and laying off staff. Leo1's restructuring comes amid a broader slowdown in the edtech industry, including edu-fintech models. Companies started diversifying revenue streams and revisited business models after the pandemic-era boom faded, and investors grew sceptical about their sustainability. The Reserve Bank of India's (RBI) crackdown on new-age lending fintechsalso came as a major blow for edu-fintech companies. 'Since February, the firm has let go of around 25–30 people, mostly field and lending operations staff, in an attempt to turn profitable," a person with direct knowledge of the development told Mint. Leo1 now employs just over 50 people, primarily in sales and technology, a steep drop from over 300 staff at its peak in 2022. Founded in 2015 as Financepeer, the company had raised $31 million Series B funding led by venture capital firms QED Investors and Aavishkaar Capital. It offers prepaid and debit cards, a community platform for students, and rewards and payment services for educational institutions. Its backers also include Ardent Ventures, DMI Sparkle Fund, 9Unicorns, LC Nueva AIF, and Maxar VC. To date, it has raised about $41 million, and was last valued at $108 million, as per Tracxn. Leo1, QED and Avishkaar did not comment on the story. Pivot from lending Lending, once Leo1's core offering, has been gradually phased out starting 2024, after the company struggled to operate under changes in the FLDG rules first initiated in 2022, one of the people said. FLDG is a risk-sharing arrangement in digital lending where a fintech company (a loan service provider) guarantees to compensate a regulated entity for a predetermined portion of loan defaults. After the June 2023 amendments to the FLDG model, lending aggregators have become less attractive. With the FLDG guarantee now capped at 5%, lower than before, NBFCs see limited upside in sourcing loans through aggregators. Moreover, amid declining volumes and a lack of scale, margins also took a hit for such aggregators. 'Margins on loans were only 2–3%, while first-loss default guarantees (FLDGs) cost around 5%, making it unviable without lending from its own book," said another person in the know, requesting anonymity. Though company is still operating the lending model, it makes up for less than 10% of the business. RBI rules on digital lending and FLDGs squeezed aggregator-led lending models, forcing many to pivot or scale back. Leo1's financials show a decline in revenue alongside mounting losses post the regulatory changes. After peaking at ₹13 crore in FY2021-22, revenue has steadily declined to ₹11.4 crore in FY2022-23 and further to ₹9.2 crore in FY2023-24, according to Tracxn. Net losses widened from ₹21.1 crore in FY2021-22 to ₹64.7 crore in FY2022-23, and ₹48.2 crore in FY2023-24. The company has since refocused on a SaaS-style model, onboarding colleges, training administrators, and enabling them to use Leo1's dashboard to manage student accounts and distribute cards, without maintaining a heavy on-campus staff presence. One of the persons quoted above, however, said the company has started to see revenue increasing in the new model since FY25 clocking about ₹11-12 crore. It has also become profitable at a monthly level since the start of FY26, largely aided by cost cuts, they added. The company is yet to file its FY25 financials with the MCA. Next bets The company now plans to introduce investment products, including digital gold, mutual funds, insurance, and loans, to broaden revenue streams, said the first person quoted above. This will put it in competition with a growing pool of wealth-tech players such as Stable Money, Dezerv, and Neo Wealth. Leo1 is betting on capturing 18–25-year-old customers early, while they are in college, to build long-term banking relationships. Leo1 currently claims to partner over 13,000 schools, and colleges, including IIT Bombay, IIHMR University, Jain University and Poornima University, among others. To scale further, Leo1 is in talks to raise a bridge round in the second half of this year. "Capital is not the key reason for stopping growth, it was the right path to explore. They need to find the right business model that balances growth with break even," said the second person quoted above. The funding amount could be in the $4-5 million range. While the company has been approached for potential mergers or acquisitions, it is not actively pursuing an exit at the momen, the person added.
Economic Times
21-07-2025
- Business
- Economic Times
Paytm Q1 Results Preview: Co seen swinging to profit on healthy revenue growth
Fintech major Paytm is expected to report a turnaround in profitability in the first quarter of FY26, with analysts projecting a profit after tax (PAT) of over Rs 18.9 crore, compared to a net loss in the same quarter last year. ADVERTISEMENT Revenue from operations is seen rising 27% year-on-year, driven by resilient performance in its payments and financial services verticals, according to brokerage JM Financial. Sequentially, YES Securities expects overall revenue growth of around 2%, adjusting for the Rs 70 crore UPI incentive booked in the March quarter. Payments services revenue is forecast to rise 5% quarter-on-quarter, while financial services and others may grow 10% QoQ, aided by a likely improvement in loan disbursals, even as lower take rates and reducing First Loss Default Guarantees (FLDG) weigh on topline growth.A key metric to watch will be the payment processing charges (PPC) as a percentage of payments revenue. YES Securities estimates this to rise to 55% in Q1, up from 49.8% in Q4FY25, mainly due to the absence of the UPI incentive benefit that had supported margins in the previous company's profitability will also be shaped by its expense profile. YES Securities projects total expenses (excluding PPC and ESOP costs) to increase 5% QoQ, compared to 1% in Q4FY25. ADVERTISEMENT This, coupled with lower operating leverage, may compress the EBITDA margin (excluding other income and ESOP cost) to just 0.6%, a sequential decline of 362 basis so, JM Financial believes Paytm is on track to report PAT-level profitability, driven by improved contribution margins and indirect expense control. Notably, the company had booked an exceptional loss in Q4FY25 due to an accelerated charge on ESOP cancellations. ADVERTISEMENT All eyes will be on the sustainability of Paytm's margin trajectory, the impact of lower FLDGs on financial services revenue, and commentary around UPI monetisation and lending partnerships as the company steps into a crucial post-regulatory transition phase. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times) ADVERTISEMENT (You can now subscribe to our ETMarkets WhatsApp channel)
Time of India
21-07-2025
- Business
- Time of India
Paytm Q1 Results Preview: Co seen swinging to profit on healthy revenue growth
Fintech major Paytm is expected to report a turnaround in profitability in the first quarter of FY26, with analysts projecting a profit after tax (PAT) of over Rs 18.9 crore, compared to a net loss in the same quarter last year. Revenue from operations is seen rising 27% year-on-year, driven by resilient performance in its payments and financial services verticals, according to brokerage JM Financial . Explore courses from Top Institutes in Select a Course Category PGDM Technology Cybersecurity Leadership Design Thinking Product Management Data Science Finance MCA Data Science Project Management Operations Management MBA Digital Marketing Artificial Intelligence healthcare CXO Data Analytics Degree others Healthcare Public Policy Management Others Skills you'll gain: Financial Analysis & Decision Making Quantitative & Analytical Skills Organizational Management & Leadership Innovation & Entrepreneurship Duration: 24 Months IMI Delhi Post Graduate Diploma in Management (Online) Starts on Sep 1, 2024 Get Details by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Sleep Apnea Ruined My Life – Then I Found This Simple Trick Health Insight Undo Sequentially, YES Securities expects overall revenue growth of around 2%, adjusting for the Rs 70 crore UPI incentive booked in the March quarter. Payments services revenue is forecast to rise 5% quarter-on-quarter, while financial services and others may grow 10% QoQ, aided by a likely improvement in loan disbursals, even as lower take rates and reducing First Loss Default Guarantees (FLDG) weigh on topline growth. A key metric to watch will be the payment processing charges (PPC) as a percentage of payments revenue. YES Securities estimates this to rise to 55% in Q1, up from 49.8% in Q4FY25, mainly due to the absence of the UPI incentive benefit that had supported margins in the previous quarter. Live Events The company's profitability will also be shaped by its expense profile. YES Securities projects total expenses (excluding PPC and ESOP costs) to increase 5% QoQ, compared to 1% in Q4FY25. This, coupled with lower operating leverage, may compress the EBITDA margin (excluding other income and ESOP cost) to just 0.6%, a sequential decline of 362 basis points. Even so, JM Financial believes Paytm is on track to report PAT-level profitability, driven by improved contribution margins and indirect expense control. Notably, the company had booked an exceptional loss in Q4FY25 due to an accelerated charge on ESOP cancellations. All eyes will be on the sustainability of Paytm's margin trajectory, the impact of lower FLDGs on financial services revenue, and commentary around UPI monetisation and lending partnerships as the company steps into a crucial post-regulatory transition phase. ( Disclaimer : Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
Time of India
17-07-2025
- Business
- Time of India
India's electric vehicles now getting financed with new models
A new wave of startups and financiers is reshaping how electric commercial vehicles (EVs) are funded in India, as early signs of scale begin to emerge in a segment that was previously seen as too niche or too risky for institutional capital, ToI reported. From battery subscription models to flexible EMIs and first-loss guarantee partnerships, lenders are adjusting financing structures to fit the economics of EVs and the credit realities of small commercial operators. Explore courses from Top Institutes in Select a Course Category CXO Artificial Intelligence MBA MCA healthcare Project Management Others Degree Healthcare Management Public Policy Data Analytics Digital Marketing Technology Data Science Operations Management PGDM Data Science Finance Leadership Product Management others Design Thinking Cybersecurity Skills you'll gain: Technology Strategy & Innovation Emerging Technologies & Digital Transformation Leadership in Technology Management Cybersecurity & Risk Management Duration: 24 Weeks Indian School of Business ISB Chief Technology Officer Starts on Jun 28, 2024 Get Details Skills you'll gain: Operations Strategy for Business Excellence Organizational Transformation Corporate Communication & Crisis Management Capstone Project Presentation Duration: 11 Months IIM Lucknow Chief Operations Officer Programme Starts on Jun 30, 2024 Get Details Skills you'll gain: Customer-Centricity & Brand Strategy Product Marketing, Distribution, & Analytics Digital Strategies & Innovation Skills Leadership Insights & AI Integration Expertise Duration: 10 Months IIM Kozhikode IIMK Chief Marketing and Growth Officer Starts on Apr 7, 2024 Get Details Skills you'll gain: Digital Strategy Development Expertise Emerging Technologies & Digital Trends Data-driven Decision Making Leadership in the Digital Age Duration: 40 Weeks Indian School of Business ISB Chief Digital Officer Starts on Jun 30, 2024 Get Details New approaches are being tailored to the specific needs of EVs. Some lenders are introducing battery subscriptions that allow buyers to pay per use—similar to how one pays for fuel—instead of covering the full upfront battery cost. Others are offering flexible EMIs that adjust based on how much the vehicle is used, making it easier for driver-owners with variable incomes to repay loans. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Play War Thunder now for free War Thunder Play Now Undo In addition, several startups are partnering with non-banking financial companies (NBFCs) using first-loss guarantee (FLDG) structures. Under these arrangements, the startups agree to absorb a portion of loan defaults, reducing the risk for lenders who are dealing with borrowers lacking formal credit histories. VidyutTech is one of the key players in this space. The company separates financing for the EV chassis and the battery. "In an ICE vehicle, fuel is an operating expense. But in an EV, the battery—30-40% of the vehicle cost—is prepaid fuel. This shifts the depreciation curve and risk," said Xitij Kothi, co-founder of VidyutTech. Vidyut offers fixed EMIs for the vehicle itself and a per-kilometre rate for battery charging. Live Events Mufin Green Finance , which manages assets under management (AUM) of Rs 1,100 crore, has already deployed over Rs 800 crore into EV financing . Much of this has focused on loans for batteries alone. "Many buyers pay upfront for the vehicle and finance only the battery, which is 30-40% of the cost," said Dhiraj Agrawal, chief business officer at Mufin. The company's battery finance portfolio currently stands between Rs 70 crore and Rs 80 crore and is expected to grow further as this financing model gains wider acceptance. Pay-per-use structures are helping to address the key ownership concerns of EV buyers, particularly individual drivers. "About 35-40% of our customers have no formal credit history. We do physical verification, involve co-applicants, and assess viability before underwriting," said Kothi. As this niche sector evolves into a viable business opportunity, startups and NBFCs appear to be working more closely to make commercial EV ownership financially feasible for a broader range of customers. The ability to split battery and chassis payments, offer flexible terms, and mitigate risk for lenders is making it easier for small operators to access EVs, a move that could have a wider impact on the commercial transport sector. (with ToI inputs)
India Gazette
02-07-2025
- Business
- India Gazette
Paytm's profitability path mirrors Zomato and PB Fintech, says Motilal Oswal
New Delhi [India], July 2 (ANI): The brokerage firm Motilal Oswal Financial Services has laid out a compelling case for Paytm's transformation into a sustainably profitable new-age tech company. The brokerage sees Paytm advancing steadily toward an inflexion point, driven by disciplined execution, a sharp focus on financial services, and robust growth in core business metrics. Motilal Oswal notes that Paytm's profitability trajectory closely resembles that of other new-age tech firms such as Zomato and PB Fintech. As these companies transitioned to profitability, their stocks saw substantial re-rating -- Zomato delivered 245 per cent returns and PB Fintech 156 per cent over the past two years. While Paytm has lagged in performance so far, the report suggests that with contribution margins projected to cross 55 per cent and adjusted EBITDA turning positive in FY26, the company may be on a similar upward path. Paytm has demonstrated resilience despite facing regulatory headwinds and market volatility in FY24 and early FY25. Its ability to sustain growth in merchant acquisition, lending partnerships, and user engagement has set the foundation for long-term profitability. The brokerage estimates that Paytm could post a profit after tax of Rs 16.2 billion in FY28. One of the key drivers is Paytm's strategic pivot toward financial services, projected to contribute 27 per cent of total revenue by FY28, up from 25 per cent in FY24. Lending is scaling rapidly through the FLDG (First Loss Default Guarantee) model, supported by over 18 partners. Disbursements are expected to grow at a 35 per cent CAGR, while GMV is projected to expand at 23 per cent CAGR from FY25 to the company is benefiting from AI-led cost efficiencies, rationalised marketing spends, and disciplined execution. These efforts are expected to expand contribution margins to 58 per cent by FY28. The report adds that despite the absence of MDR on UPI and a sharp drop in UPI incentives (Rs 2.9 billion in FY24 to Rs 700 million now), Paytm is scaling sustainably through its dual-core strategy of payments and financial services. The company continues to deepen its merchant ecosystem, with 44 million merchants onboarded and 12.4 million devices deployed as of Q4 FY25 -- a 16 per cent year-on-year growth. Enhanced monetisation through subscriptions and merchant lending, especially among high-GMV partners, is further strengthening the revenue model. Motilal Oswal has revised its target price for Paytm to Rs 1,000, valuing the company at 20x FY27E EBITDA. While maintaining a Neutral rating due to regulatory uncertainties and UPI market share dynamics, the brokerage underlines that Paytm's Rs 156 billion cash reserves, improving financial mix, and clear glide path to profitability make it one of the best-positioned new-age platforms for potential re-rating. (ANI)
