Paytm’s trouble on financial and regulatory sides do not seem to be heading down, at least any time soon. Its parent, One 97 Communication, reported a widening of its net loss to ₹840 crore ($100 million) for the quarter ending June 2024. This rise comes on the heels of a ₹357 crore ($42 million) loss in the corresponding quarter of the previous year. The company’s struggles are further highlighted by a 36% year-on-year decline in revenue, which settled at ₹1,502 crore ($179.5 million) for Q1FY25.
Following the announcement of its earnings, Paytm’s stock experienced a 4.3% drop, closing at ₹425.65 on the Bombay Stock Exchange (BSE). The company’s market capitalization has also decreased to ₹28,155 crore. Despite this initial dip, the stock eventually showed some recovery, recovering to currently trade at ₹455.90. Analysts had projected a net loss for Paytm in the range of ₹840-₹1,013 crore, with expected revenues between ₹1,490-₹1,532 crore for the quarter.
Company’s Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) loss stood at ₹792 crore for the quarter, while its employee costs dropped by ₹151.9 crore quarter-over-quarter (QoQ) and by ₹153.6 crore year-over-year (YoY). Furthermore, the firm’s GMV, representing the total value of payments made to merchants via Paytm, decreased to ₹4.26 lakh crore, down from ₹4.69 lakh crore in the previous quarter. The company boasts a strong balance sheet with ₹8,108 crore in cash reserves and holds stock acquisition rights in PayPay Corporation, which, once exercised, would give it a 5.4% stake.
The decline in revenue was widespread across Paytm’s various business segments. This decline trickled down to specific services like payments to consumers (down by 81% to reach ₹83 crore), payments to merchants (down by 28% to amount to ₹801 crore), and payments to others (registering a drop of 18% to reach ₹280 crore). Even the processing charge on payments, a vital income stream, declined by 28% sequentially and 34% year-on-year.
The decline in Paytm’s revenues and increase in losses could well be linked to the regulatory clampdown that it faced, in the form of RBI’s directive to halt several operations of Paytm Payments Bank. Earlier this year, the RBI imposed restrictions on Paytm Payments Bank Limited (PPBL), a subsidiary that played a crucial role in processing a large portion of the company’s mobile payments. This restriction significantly curtailed Paytm’s ability to conduct business through PPBL, leading to the decline in revenue and the widening of losses witnessed in Q1FY25.
Despite the current financial setbacks, Paytm remains optimistic about its future. The company points towards a “rebound in merchant operating metrics” and “stability in the consumer base” as indicators of a path towards recovery. The digital payments giant also aims to grow its GMV, and increase the number of merchants using its payment solutions as well. “I believe this is just the beginning of the end of the tough times. We are hoping and working on ensuring that we deliver at least one profitable quarter in this financial year as soon as we are able to see a lot more clarity coming our way,” Vijay Shekhar Sharma, Paytm CEO, said in a call with analysts.
