India’s Digital Finance Giants Shift Focus from Growth to Profitability

For years, India’s digital finance companies have faced a familiar question: they could attract millions of users, but could they turn that scale into sustainable profits? Rising compliance costs, regulatory restrictions and limited monetisation opportunities from UPI payments raised questions about the economics of digital finance.

The Q2 FY27 earnings of Paytm, PB Digital Finance, Angel One, Bajaj Finance and Jio Financial Services offer different answers. While some are reporting stronger operating performance, others are still building their businesses or dealing with earnings fluctuations caused by one-off income. The common thread is a growing emphasis on monetisation, cost efficiency and the quality of earnings.

What Is Driving the Shift?

Digital Finance companies are increasingly looking beyond customer acquisition to generate more value from existing users. Lending, insurance distribution and wealth management offer additional revenue streams, while automation and artificial intelligence can improve efficiency.

However, technology does not automatically translate into lower costs, and revenue growth does not always mean stronger profitability. The results of these companies show why the underlying numbers matter.

Paytm: 

One 97 Communications, the parent of Paytm, reported a consolidated net profit of Rs.225 crore in Q2 FY27, compared with a loss of Rs.29.4 crore a year earlier. Revenue from operations increased 28% year-on-year to Rs.2,648 crore.

The improvement reflects stronger operating performance and a business model built around payments-led distribution. Paytm uses its consumer and merchant network to offer financial services and technology products rather than relying on payment transactions alone.

Founder and Chief Executive Officer Vijay Shekhar Sharma described the changing economics of serving small businesses.

“Paytm changed the cost of serving a small business to a profit,” Sharma said, adding that the company is demonstrating that “serving them can be profitable.”

He also emphasised growth, saying, “We are going to go all-in on market share, and we call it as a primary KPI for my team.”

UPI merchant discount rate (MDR) could provide an additional boost, but it is not the foundation of Paytm’s profitability. The company has indicated that any MDR on UPI transactions would be an upside rather than a core assumption in its business model. A potential MDR structure could improve payment processing margins, depending on the rates introduced and the transaction mix.

Angel One: 

Angel One reported a 58.2% year-on-year increase in net profit to Rs.335 crore in Q2 FY27. Its expanding Margin Trade Funding (MTF) business provides an additional source of interest income, helping diversify its revenue mix.

Brokerage businesses remain sensitive to trading activity and regulatory changes, particularly in futures and options. Lending income can help offset fluctuations in transaction-linked revenue, although it introduces credit and funding risks.

Angel One’s Group CEO, Ambarish Kenghe also highlighted the role of technology in strengthening operational resilience.

“This quarter, we strengthened our cybersecurity stack with AI-driven vulnerability detection and automated remediation workflows, improving our resilience and reducing risk exposure,” he said.

The emphasis on cybersecurity is particularly relevant as financial services firms increasingly integrate AI into their operations. Finance Minister Nirmala Sitharaman’s meeting with bank heads on emerging AI-related cybersecurity threats in April 2026 further underlined the importance of protecting financial systems and customer data.

For Angel One, the test will be whether its technology investments, expanding credit business and diversified offerings can sustain profitability through changing market conditions.

Bajaj Finance: 

Bajaj Finance reported a 29% year-on-year increase in consolidated net profit to Rs.6,367 crore. Its assets under management grew 26% to approximately Rs.5.85 lakh crore, while it booked around 1.33 crore new loan accounts during the quarter.

Digital onboarding and data-driven underwriting are helping the company expand its reach. But for a lender, growth is only one part of the profitability equation. It must also ensure borrowers repay their loans.

This is where credit quality becomes important. In simple terms, it measures how well borrowers are repaying their loans and how much money a lender risks losing when they default. Poor credit quality can force a lender to set aside more money for potential losses, reducing profits.

Bajaj Finance’s loan losses and provisions amounted to Rs.2,166 crore in Q2 FY27, including an additional Rs.337 crore provision for management and macroeconomic risks. Excluding this additional provision, loan losses and provisions declined 12% year-on-year to Rs.1,829 crore.

Loan losses as a proportion of average assets under finance improved to 1.56% from 1.88% a year earlier. Excluding the additional provision, the ratio would have been 1.32%.

In practical terms, the lower ratio suggests that credit losses are taking up a smaller share of the company’s lending assets. The additional provision, meanwhile, provides a buffer against potential risks. Both figures matter when assessing whether Bajaj Finance can continue expanding while protecting its earnings.

Jio Financial Services:

Jio Financial Services presents a different picture. Its consolidated revenue from operations rose 73.2% year-on-year to Rs.1,699.3 crore in Q2 FY27, while net profit fell approximately 51% to Rs.340 crore.

The decline needs to be understood in context. Jio Financial received Rs.269 crore in dividend income in Q2 FY26, compared with no dividend income in Q2 FY27. The absence of this income, alongside changes in expenses and other income, contributed to the year-on-year decline in profit.

This changes the interpretation of the headline numbers. Lower reported profit does not, by itself, mean the underlying business deteriorated. The company’s expanding lending operations and growing interest income point to a business that is continuing to scale, although its recurring earnings need to be assessed separately from one-off income.

Jio Financial is also building partnerships across investments, insurance and lending, including with BlackRock, Allianz and Bank of America. These relationships could support its expansion, but the long-term outcome will depend on how effectively the company converts growth into recurring earnings while managing operating costs, funding requirements and credit risk.

The Bigger Picture

India’s Digital Finance industry is moving beyond the race for users towards a greater focus on monetisation and sustainable earnings. Paytm is working to improve its cost structure, Angel One is diversifying beyond brokerage, Bajaj Finance is scaling its lending operations, and Jio Financial is investing in a broader financial services ecosystem.

The results underline that profitability is not driven by digital scale alone. Companies must convert customer relationships into revenue while controlling costs and managing risk.

For investors, the next test will be whether these earnings improvements can be sustained. Cash generation, operating expenses, credit quality and returns on capital will matter as much as headline profit growth in determining the long-term strength of India’s Digital Finance businesses.