India’s Paytm flags further financial impact of banking unit wind down
INDIAN digital payments firm Paytm posted a wider loss in the fourth quarter on Wednesday (May 22) and warned of further financial impact as the company absorbs the full effect of the Reserve Bank of India’s (RBI) order to wind down its banking unit.
Paytm wrote down the value of its entire investment in Payments Payment Bank Ltd (PPBL) – worth 2.27 billion Indian rupees (S$36.7 million) – considering “future uncertainties” over the latter’s business operations, it said in an exchange filing.
The full impact of RBI’s move would be felt in the April-June quarter, when Paytm expects its loss before interest, taxes, depreciation and amortisation to be between five billion and six billion rupees, the company said.
“While we have mentioned that the next quarter (April-June) will be Ebitda (earnings before interest, taxes, depreciation and amortisation) negative, we will get back very quickly on the path of profitability,” Madhur Deora, president and group chief financial officer of Paytm said in a post-earnings analyst call, without specifying any timeline.
Paytm’s consolidated net loss in the fourth quarter widened to 5.5 billion rupees from 1.68 billion rupees a year ago.
“Our fourth quarter 2024 results were impacted by temporary disruption on account of UPI (Unified Payments Interface) transition etc and permanent disruption because of PPBL embargo,” Paytm said.
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The digital payments firm said it was confident of seeing “meaningful improvement” starting from the second quarter, adding it was also planning to save between five billion and six billion rupees in employee costs over time as it becomes a “leaner” organisation.
“Clearly, profitability is under severe pressure due to the impact from RBI regulations,” Macquarie analyst Suresh Ganapathy wrote in a note.
One of India’s first fintech firms to go public, Paytm said its revenue from the payments business, which contributes roughly 69 per cent to the total, rose 7 per cent on-year but was down 9 per cent sequentially.
A number of lending partners halted loans given out via the platform following the RBI’s move, impacting its ability to earn fee income. The value of loans distributed fell 54 per cent to 58 billion rupees, the company said.
Revenue from its financial services business, which includes the loan business, fell 36 per cent in the fourth quarter.
However, loan disbursal increased to 20 billion as at April 2024 after falling to nine billion rupees in February 2024, which Macquarie’s Ganapathy said was “the good part” of the results.
Paytm’s CEO Vijay Shekhar Sharma said the company is trying experiments on secured loans as part of their product offerings.
The company’s shares, which have lost over 50 per cent of their value since the RBI’s order, reversed losses from earlier in the day to close 4.88 per cent higher.
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