One 97 Communications, the parent company of India’s leading digital payments platform Paytm, warned of job cuts Wednesday after reporting its consolidated net loss had widened to $66.1 million in the quarter ending March, compared to a loss of $20.11 million in the same quarter last year, as it grapples with a recent regulatory clampdown.
Paytm, once the most valuable Indian startup, said in its earnings report that it expects reductions in employee costs and pare down its annualized expenses on people cost by $48 million to $60 million.
For the full fiscal year 2024, Paytm’s consolidated net loss stood at $170 million, down from $213 million in FY23. The Noida-headquartered company’s revenue from operations grew 25% year-on-year to $1.19 billion in FY24, though increased expenses across payment processing charges, marketing, employee benefits and software cloud costs weighed on its bottom line.
India’s central bank barred Paytm Payments Bank, an associate firm of Paytm, from offering many banking services starting March 15, a move that forced the Noida-headquartered firm to ink new partnerships with banks for continuity of many of its businesses.
Its consolidated revenue from operations fell to $272.3 million in the January-March quarter.
A major blow to Paytm during the quarter was a loss of $27.2 million on impairment of its investment in associate company Paytm Payments Bank.
The results shared by Paytm today include “enough data points to suggest that the business is past the bottom in terms of payment volumes and user/merchant traction,” Bernstein analysts said in a note to clients. “Though from a financial metrics perspective, 1QFY25 is likely to be the bottom as it would reflect the full impact of the lower steady state (vs. 2 months impact in 4QFY24).”
The analysts, however, cautioned that Paytm’s payment GMV has dropped by about 20% and the payment processing margin expectation has also declined, that together “translates to a near 50% blow to the payment margins.” They estimated, however, that Paytm’s merchant lending volumes have picked up in March and April in a clear sign of revival.
Paytm still had about $1.03 billion in the bank at the end of March 31. Shares of Paytm fell by 1.69% on Wednesday to 345.8 Indian rupees, giving it a valuation of $2.64 billion. Paytm went public in 2021 at a valuation of $20 billion.
“I am happy to share that we have successfully transitioned our core payment business from PPBL 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 founder and CEO Vijay Shekhar Sharma in the annual shareholder letter.
“It has been possible in such a short period of time with extensive support from the Regulator, NPCI, Bank partners and our committed team mates. The unwavering commitment of our government and regulator to support innovation and financial inclusion, keeps us true to our mission and committed to our long-term sustainable growth opportunity.”