Paytm Q4 loss widens to ₹550 cr as fintech writes off ₹227 cr investment in Paytm Payments Bank

Paytm parent One97 Communications’ loss widened to ₹550 crore for the quarter ended March 31, 2024 compared with ₹167 crore in the corresponding period a year ago.

Loss widened due to impairment of ₹227 crore towards the carrying value of Paytm's investment in Paytm Payments Bank.

Paytm Payments Bank is 51% owned by Paytm founder and CEO Vijay Shekhar Sharma while the remaining 49% is owned by One97 Communications.

The digital payments firm's revenue from operations fell 3% year-on-year to ₹2,267 crore during the fourth quarter as against ₹2,334 crore in Q4 FY23.

Paytm’s fourth-quarter results were impacted by temporary disruption on account of UPI transition and permanent disruption because of the banking regulator’s restrictions on Paytm Payments Bank.

For the full fiscal 2023-24, losses narrowed to ₹1,422 crore from ₹1,776 crore in FY23. Revenue rose 25% year-on-year to ₹9,977 crore in FY24 aided by GMV growth, device additions, and growth in the financial services distribution business.

“We expect near-term financial impact to our revenue and profitability, due to disruptions faced in our business in Q4. This includes steady state impact due to pausing of PPBL wallet. We had also paused a few other payments and loan products to our customers during the last quarter, and I am happy to share that many such products have been restarted or in the process of starting soon,” says Paytm founder Sharma.

Following the Reserve Bank of India’s directive ordering Paytm Payments Bank (PPBL) to stop accepting fresh deposits in its accounts and wallets, Paytm says it has transitioned its core payment business from PPBL to other partner banks. The National Payments Corporation of India (NPCI) had approved One97 Communications' application to participate in UPI as a third-party application provider (TPAP) under multi-bank model.

“This move de-risks our business model and also opens up new opportunities for long-term monetisation, given our platform’s strength around customer and merchant engagement. It has been possible in such a short period of time with extensive support from the Regulator, NPCI, Bank partners and our committed team mates,” says Sharma.

“The unwavering commitment of our government and regulator to support innovation and financial inclusion, keeps us true to our mission and committed to our long-term sustainable growth opportunity,” Sharma says.

Paytm says it is also working on significant cost efficiencies including leaner organisation structure and pruning non-core businesses. “In recent years, our employee costs have increased due to investments primarily in technology, merchant sales, and financial services. For the coming year, while we continue to invest in the merchant sales team, as well as risk and compliance functions, we expect reductions in other employee costs,” says Paytm. The company expects annualised people cost savings of ₹400 - ₹500 crore.

Sharma says Paytm is taking various steps to strengthen the governance framework across group entities (especially regulated entities) by appointing subject matter experts as advisors or independent directors, reviewing various processes etc. “I am ensuring that we have greater regulatory engagement and have higher focus on compliance, in letter and in spirit,” says Sharma.

Revenue from financial services and others increased 30% to ₹2,004 crore in FY24. Net payment margin has gone up 50% to ₹2,955 crore due to increase in payment processing margin and increase in merchant subscription revenues, the fintech says.