Can India’s Paytm go from cash guzzler to cash-generating machine?

In The Top Up this week, we look at Paytm’s most recent financial results and DBS Bank’s ambitions in the digital assets space. [Read from your browser]( The Top Up 💵 Welcome to The Top Up! Delivered every Wednesday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in fintech. If you’re not a subscriber, get access by [registering here](. Written by Simon Huang Journalist Hello {NAME} One 97 Communications’ IPO became India’s [largest listing]( when it went to market at the tail-end of 2021. The firm is the parent entity of Paytm, a mobile payments and financial services company. Shares continued to climb after the IPO, peaking a week later. The company failed to sustain this momentum, with shares even going down by more than 70% at one point. But like other tech companies, shares of One 97 made a bit of a comeback this year - they are up by 17%, year to date. In this week’s premium story, my colleague Samreen analyzes the company’s most recent results, which beat market expectations by achieving operational profitability three quarters ahead of guidance. Can One 97, which was once called a “cash guzzler,” become the “free cash flow generating machine” that its CEO, Vijay Sharma, envisions? One lender in Singapore can certainly be considered a cash-generating machine. DBS Bank’s earnings in the fourth quarter of 2022 saw net profit surge to S$2.3 billion (US$1.7 billion), beating estimates as well. However, one issue that DBS faces is where to invest those earnings for the future. Its digital assets business, for instance, is growing quickly, but it may also attract more scrutiny from regulators. I look at this more closely in this week’s Hot Take. – Simon  --------------------------------------------------------------- THE BIG STORY [Paytm looks to turn things around with focus on cash flow]( Fresh opportunities and a growing loan portfolio could boost the topline of the payments firm, which recently turned operationally profitable.  --------------------------------------------------------------- THE HOT TAKE DBS sticking to its guns on digital assets Here’s what happened: - DBS, Singapore’s largest bank, announced its [Q4 2022 results]( last week, with net profit growing 20% to S$8.2 billion (US$6.1 billion). - During the earnings call, CEO Piyush Gupta said the bank would be “staying the course” on its digital assets strategy despite market developments in the past year. - The bank also announced plans to [apply for a license]( that will allow it to offer crypto trading services to customers in Hong Kong. Here’s our take: 2022 was an annus horribilis for crypto investors. Bitcoin [fell 64%]( while Ethereum closed the year down 67%. Several crypto companies went bankrupt, including lending platform [Celsius]( and hedge fund [Three Arrows Capital](. Most spectacular was the downfall of trading exchange FTX, which went bankrupt amid allegations of fraud and gross financial mismanagement. With investors badly burned and regulators increasing scrutiny of the sector, it isn’t a surprise that many are reevaluating their commitment to crypto. Research from S&P Global [shows]( that the value of private equity/venture capital or institutional investor involvement in cryptocurrency and decentralized finance was down 23% in 2022. But this spate of bad news doesn’t seem to have deterred DBS, the Singapore-based financial services powerhouse that also has significant operations in Hong Kong, Taiwan, mainland China, Indonesia, and India. The bank’s members-only [DBS Digital Exchange (DDex)]( offers access to digital assets including security tokens and cryptocurrencies. Membership is restricted to financial institutions, family offices, and accredited investors (i.e., high-net-worth individuals). Being an exchange from a regulated entity is a “benefit” in an environment where many other similar platforms are coming under question and scrutiny, said DBS’ Gupta in the Q4 results media briefing. The CEO also stressed how the members-only feature limits crypto exposure to sophisticated investors - a rule that most privately owned exchanges don’t enforce. He added that any offering to retail investors would be guided by the stance of regulators, noting that this differs from one jurisdiction to another. (But he also previously said DBS [doesn’t plan to offer]( crypto trading to retail users in the near future.) This reflects the trade-offs that established financial players have to make when implementing a crypto strategy. Keeping restrictions lax could draw a large inflow of funds, trading activity, and profits; doing the opposite protects investors, but it comes at a cost. In 2021, DDex’s full-year trading volume was around [US$1.1 billion](. Binance, in contrast, had a spot trading volume of [US$5.29 trillion]( last year. DBS has said the volume of traded tokens was up between 70% to 80% in 2022, although the value was flat due to the decline in token prices. Gupta added that while revenues from the business are small, they are expected to be up 60 to 70% this year. DBS is not alone. Global financial institutions such as [Blackrock]( and [Fidelity]( seem determined to retain - or even increase - their exposure to crypto. Regulators and legislators, however, appear increasingly skeptical. In the US, regulators are reported to be [cracking down]( on the industry with a flurry of new fines, cases, and policy statements. Meanwhile, the Monetary Authority of Singapore sees [“strong potential”]( and is “actively promoting” the wider digital assets ecosystem while seeking to “strongly discourage” and “restrict” speculation in cryptocurrencies. This was the regulator’s stance as of August 2022. Banks, which are highly regulated, have two options. They can ignore crypto entirely and focus on the many other promising areas of fintech. But this approach may be a disservice to shareholders in the long run if crypto proves to be a game-changer in the future of finance. Or they can do what DBS did: bet on crypto. This strategy, however, will involve a careful balancing act and uncertain future benefits. – Simon --------------------------------------------------------------- NEWS YOU SHOULD KNOW Also check out Tech in Asia’s coverage of the fintech scene [here](. 1️⃣ [Alipay+ goes Down Under]( The integration will let 8,000 Australian retailers accept e-wallets such as Kakao Pay and TrueMoney as payment methods. 2️⃣ [Vietnam earned-wage access firm Gimo eyes profitability by 2028]( The company said that over the past year, its revenue climbed 24x while its transaction volume grew 11x. 3️⃣ [Google, Amazon Pay get India’s approval to operate as payment aggregators]( The country’s central bank returned applications from four firms including Paytm and PayU, which can continue to operate without adding new merchants. 4️⃣ [Shopee quietly rolls out SLoan in Malaysia]( Eligible Shopee users can access loans at competitive interest rates, with flexible repayment options.  --------------------------------------------------------------- FYI 1️⃣ [Malaysia’s digibank race heats up: 3 things to watch]( Four out of the five digibanks are led by female CEOs.  --------------------------------------------------------------- That’s it for this edition - we hope you liked it! 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