Paytm parent reports Q4 revenue decline, wider losses; says recovery likely in Q2FY25

One 97 Communications Ltd, the parent of payments aggregator Paytm, expects to see the full financial impact of the “temporary disruptions” in the first quarter of FY25, following the Reserve Bank of India's restrictions on the fintech in January.

As a result, June quarter revenues are likely to range between ₹1,500 crore and ₹1,600 crore, the company said. However, it is confident of seeing a meaningful improvement starting from the September quarter (Q2FY25), based on restarting paused products and achieving steady growth in its operating metrics. 

The company is also planning to double down its focus on insurance and wealth to "improve bottomline."

"We are also taking various steps to strengthen the governance framework across our group entities (especially regulated entities) by appointing subject matter experts as advisors or independent directors, reviewing various processes etc," said Paytm founder and chief executive, Vijay Shekhar Sharma, in the annual shareholder letter.

On Wednesday, One 97 Communications reported a fall in its fiscal fourth-quarter revenue to ₹2,399 crore, down from ₹2,465 crore a year earlier. Losses for the three months through March widened to ₹551 crore, from ₹168 crore a year earlier, largely due to an impairment of ₹227 crore on the company's investment in Paytm Payments Bank Ltd, in which it holds 49%.

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Since the start of the year, Paytm's stock has declined by a significant 46%. Shares dropped over 1% to ₹346.75 apiece on the National Stock Exchange following the announcement of the results.

"We have successfully transitioned our core payment business from PPBL (Paytm Payments Bank Ltd) to other partner banks. This move de-risks our business model and also opens up new opportunities for long-term monetization, given our platform’s strength around customer and merchant engagement," said Paytm Sharma added.

Paytm Q4 numbers

The company's Q4 payments revenues fell 9% sequentially to ₹1,568 crore due to the disruption of PPBL products, temporary impact on certain businesses and weakness in some operating metrics.

On the merchant side, while the device merchant base has increased marginally, the active device base has declined by approximately 1 million due to higher attrition in February and March, compared to the regular trend. Additionally, there have been no new merchant additions since February, the company said in the earnings note.

"Subscription revenue was also impacted due to lower new merchant addition (resulting in lower revenue from device deployment incentive and set-up fees), lower active device merchants and temporary rental waiver for ring fencing certain cohorts of merchants," it added.

Paytm's merchant subscription revenue in Q4 was about ₹90 per device per month and the company expects it to "bottom out" at around ₹80 in Q1 FY25, "post which it should increase towards ₹100 by Q4 FY 2025."

Merchant loans distributed, which declined 28% year-on-year, due to a temporary pause in February, has seen a "good latent demand" since the end of March when it resumed.

The company's indirect expenses during the quarter grew 13% to ₹1,186 crore following decline in revenues due to the disruptions.

Indirect expenses fell 9% from the previous quarter on account of employee cost reduction and temporary reduction in marketing costs after stopping direct user onboarding since February. 

The company, however, plans to increase its marketing investments in coming quarters to focus on reactivating and acquiring new customers.

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Regulatory Challenges and Recovery Steps

The company is also undergoing restructuring and has experienced several top-level exits in recent months.

Earlier this year, the Reserve Bank of India (RBI) directed Paytm Payments Bank Ltd to halt new credit and deposit operations, top-ups, and fund transfers, among other banking activities. This action followed a comprehensive audit by external auditors, uncovering consistent non-compliance and supervisory concerns within the bank.

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Despite the disruptions, Paytm has seen stabilization of growth in customer and merchant base metrics. Excluding payment products such as digital wallets, Paytm is seeing a positive growth trend in payment GMV since last month. The company said it expects subscription merchant net additions to improve past trend lines by Q3 FY 2025.

"Their estimates are largely conservative for Q1. We can assume that they would do better than this given that their metrics are gradually stabilising. These are encouraging signs to believe that they are on their path to recovery starting Q2," said Rahul Jain, vice president at Dolat Capital.

Additionally, Paytm has partnered Axis Bank, HDFC Bank, State Bank of India, and Yes Bank to ensure smooth business migration, demonstrating proactive measures to address operational challenges.