Hurt by disruption on account of UPI transition and a permanent hit because of PPBL embargo, One 97 Communications Ltd (Paytm) on Wednesday reported a widening of losses at Rs 550 crore for the March quarter, which was in line with Rs 350-750 crore loss that analysts projected earlier. Paytm said it has impaired the carrying value of company’s investment in PPBL; it sees Q1 to stay impacted but hopes for a recovery in the September quarter. Here are key takeaways from Paytm's Q4 results and annual document:
Q1 to be hit by temporary disruptions Due to the current embargo on PBBL products such as Paytm wallet and FASTag, Paytm anticipates the steady state annualised direct impact on Ebitda to be Rs 500 crore. Most of this impact will be in Q1 as these products were operational during most part of Q4FY 2024.
"Temporary disruptions in operating metrics (MTU, merchant base, payment GMV) during February and March. This is expected to have an incremental Ebitda impact of Rs 100-150 crore in Q1FY2025 and should start recovering from Q2 as we are seeing stabilization or growth in consumer and merchant base metrics from April/May," Paytm said.
Focus on distribution-only credit disbursement model Paytm said it is focused on driving credit growth through a distribution-only disbursement model, owing to a much bigger TAM (total addressable market), wider interest from large banks and non-banks, and easier tech integration and more regulatory clarity. The collections under this model will be managed directly by lending partners. The distribution only loans have continued to scale well and the company has added more lending partners during the quarter, including pilots with banks.
Q1 sales likely at Rs 1,500-1,600 crore
Paytm expects Q1FY2025 revenue of Rs 1,500-Rs 1,600 crore and Ebitda before ESOP of minus Rs 500-600 crore. Paytm said it confident of seeing meaningful improvement starting from Q2 FY2025, based on restarting certain paused products and achieving steady growth in operating metrics.
Investments in merchant sales team to continue
Paytm said its employee costs have increased in recent years 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. We expect annualized people cost savings of Rs 400-500 crore.
Halt in payments and loan distribution businesses
During the fourth quarter, Paytm took various prudent measures in line with regulatory guidance and circulars, in the credit and payment business. Due to this and temporary disruption in operating metrics, it has taken a conservative view and paused certain payments and loan distribution businesses. With emerging regulatory clarity and the recalibration of these products, it has started or will be starting these products soon.
"These changes are expected to have an incremental Ebitda impact of Rs 75- Rs 100 crore, in Q1 FY 2025 and should start recovering in subsequent quarters. In Q4 FY 2024, we had lower marketing spends, as we paused most of the user growth spends in the month of February and March. We expect to reinvest in these areas in the coming financial year. While we experienced financial impact in Q4 due to the above disruptions, the full financial impact will be seen in Q1 FY 2025," Paytm said.
Insurance and wealth to improve bottomline In FY25, Paytm's key focus would be leveraging significant consumer opportunities in embedded insurance and wealth product distribution. Tapping on the opportunity in embedded insurance, the company recently launched a health insurance product combining Healthcare, OPD and cashless hospitalisation on a monthly subscription. AI-led efficiency leading to savings Paytm said its focus on AI-led efficiency is expected to drive operating leverage, with annualised savings of Rs 400-500 crore expected to materialise in due course.
"The user engagement on the platform continues to grow with average Monthly Transacting Users (MTU) for Q4FY24 increasing by 7 per cent YoY to 9.6 crore," it noted.
Operating metrics see stability In the short term, while Paytm saw temporary disruptions in operating metrics (MTU, merchant base, GMV, and loan distribution), the growth in consumer and merchant base metrics is stabilising in Q1 FY25.
Excluding payment products such as digital wallets, Paytm said it is now seeing a positive growth trend in payment GMV since the month of April. It expects subscription merchant net additions to improve to fully recover past trend lines by Q3 FY 2025.
Paytm becomes a TPAP Paytm has become a Third-Party Application Provider (TPAP) with NPCI for the UPI channel. It has partnered with Axis Bank, HDFC Bank, State Bank of India (SBI), and YES Bank and have started transitioning our UPI users to these banks, ensuring seamless UPI payments.