Paytm, a digital payments firm, posted a wider loss in the fourth quarter due to weakness in its payments and financial services business after the central bank shut down its banking unit. In early February 2024, the Reserve Bank of India had ordered Paytm Payments Bank, an associate of Paytm, to stop accepting fresh deposits in its accounts or digital wallets from March, raising concerns about revenue from the company's main payments business.
The company's consolidated net loss was Rs. 550 crore, as it incurred an impairment of Rs. 227 crore to scale down Paytm Payments Bank's business. The company's revenue from operations also experienced a 3% year-on-year decline, reaching Rs 2,267 crore, compared to Rs 2,334 crore in the same quarter of the previous year.
Paytm reported that its payments business revenue grew 7% YoY to Rs 1,568 crore but was down by 9% quarter-on-quarter (QoQ) due to disruptions in PPBL products and operating metrics. The company distributed products like the Paytm wallet and FASTag, but due to the embargo, it anticipates a steady state of an annualized direct impact on EBITDA of around Rs 500 crore.
As of March 2024, merchant subscriptions were 1.07 crore, showing a growth of 39 lakh YoY. Subscription revenue in Q4 was impacted due to lower new merchant deployment and lower active merchants. In the fourth quarter, merchant subscription revenue stood at Rs 90 per device per month, and the company expects it to bottom out at Rs 80 in Q1 FY25, after which it should increase to Rs 100 by Q4 FY25.
During the first quarter, the company aims to acquire new merchants, reactivate inactive ones, and redeploy devices from inactive merchants to new ones. The active device base has declined by around 10 lakh due to higher attrition in February and March, as well as lower subscription revenue due to lower new merchant additions and temporary rental waivers.
The value of merchant loans distributed declined by 28% YoY to Rs. 1,671 crore, as it was paused in February and has seen good latent demand once it was resumed in March. Payment processing charges were Rs. 715 crore, down 8% YoY, due to the impact of PPBL products and the temporary impact of the conservative approach taken for certain payment products. Promotional cashbacks and incentives were down 41% YoY to Rs. 46 Cr, which is 1 bps of GMV. The decline was attributed to a lower emphasis on user growth and lower wallet cashback.
In a letter to shareholders, Paytm founder and CEO Vijay Shekhar Sharma said, ‘Paytm has successfully transitioned its core payment business from PPBL to other partner banks, de-risking the business model and opening up new opportunities for long-term monetization. Due to disruptions in Q4, Paytm expects a near-term financial impact on revenue and profitability. However, many payments and loan products have been restarted or are about to begin. The company is also working on significant cost efficiencies, including a leaner organization structure, and is focusing on AI capabilities to revolutionize customer and merchant care in the financial industry’.
The stock had initially witnessed a fall but later managed to trade in green. The stock at time of reporting was trading at Rs. 357.
