May 22nd 2024.
The digital financial services company, One97 Communications, known for its popular brand Paytm, recently announced an increase in its loss for the fourth quarter of the financial year 2023-24. The company reported a loss of Rs 550 crore, compared to Rs 167.5 crore in the same period last year. This was due to the Reserve Bank of India's ban on transactions related to its payments bank, which significantly impacted its revenue.
In a regulatory filing, Paytm stated that the ban and the transition to the Unified Payments Interface (UPI) had a temporary disruption on its operations, resulting in a 3% decline in revenue year-on-year. The company's contribution margin, including UPI incentives, was 57%, while it was 51% without UPI incentives. This decrease in revenue was mainly due to the ban on its products like the Paytm wallet and FASTag, which were distributed by Paytm. As a result, the company expects a direct impact of Rs 500 crore on its EBITDA in the first quarter of the financial year 2025.
To mitigate this impact, Paytm has written off its investment of Rs 227 crore, representing a 39% stake in Paytm Payments Bank Limited (PPBL). This decision was made due to the uncertainty surrounding the bank's business operations and any future regulatory developments. As a result, the company recorded an impairment provision of Rs 2,271 crore, which was disclosed as an impairment of investment in associate in its audit note.
Paytm's founder and CEO, Vijay Shekhar Sharma, who holds a 51% stake in PPBL, stated that the financial year 2024 was a landmark year for the company as it achieved its first full year of EBITDA profitability before Employee Stock Ownership Plan (ESOP) costs. Despite the regulatory action on its associate entity, PPBL, the company showed a strong revenue momentum and remained focused on profitability.
The company's revenue from operations declined by 2.8% to Rs 2,267.1 crore in the fourth quarter of the financial year 2023-24. This decrease was due to temporary disruptions in its operating metrics, such as Monthly Transacting Users (MTUs), merchant base, and Gross Merchandise Value (GMV) in February and March. However, Paytm expects to recover and see a steady growth in these metrics from April/May onwards.
For the full financial year 2024, the company's loss narrowed to Rs 1,422.4 crore, compared to Rs 1,776.5 crore in the previous year. Its annual revenue also saw a significant increase of 25% to Rs 9,978 crore from Rs 7,990.3 crore in the financial year 2023. Paytm estimates that the full impact of the disruption in the fourth quarter will be visible in the June 2025 quarter and expects a revenue of Rs 1,500-1,600 crore in the first quarter of the financial year 2025.
Despite the challenges faced by the company, it reported a 25% increase in revenue for the financial year 2024, mainly due to the growth in GMV, device additions, and the financial services distribution business. Its net payment margin also increased by 50% to Rs 2,955 crore, driven by an increase in payment processing margin and merchant subscription revenues. The company's average monthly transacting users grew by 7% to 9.6 crore, and its merchant subscriptions increased by 58% on a year-on-year basis to 1.07 crore.
Paytm's Chief Business Officer, Offline Payments, Ripunjai Gaur, has been designated as a senior management personnel of the company. Despite the disruption in its operations, the company remains confident of seeing a meaningful improvement in the second quarter of the financial year 2025, with the restart of certain paused products and a steady growth in its operating metrics.
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