After reviewing the Q4 FY24 results of Paytm, Macquarie, a research firm, noted that Paytm’s loan disbursements surged to Rs 20 billion in April 2024, bouncing back from a low of Rs 9 billion in February 2024.
This rebound was attributed to regulatory directives affecting its associated entity.
According to a report by news agency ANI, Macquarie said, “Clearly profitability is under severe pressure due to impact coming from RBI regulations. However, the good part is that, as per management disclosures, loan disbursals after having plummeted to Rs 9 bn in Feb-2024, have now increased to Rs 20 bn as of April 2024. For PayTM’s survivability, it requires strong support from the lending ecosystem and this remains a key monitorable in our view.”
In FY24, Paytm recorded a remarkable 48% year-on-year growth in its loan distribution business, reaching Rs 52,390 crore.
Transitioning from its previous model of distribution plus collection incentives, the company is now concentrating solely on the distribution aspect.
The report highlighted that Paytm anticipates loan rates to stabilise between 3% to 3.5% in the long run.
The company highlighted in its earnings release that distribution-only loans have sustained strong growth, with additional lending partners introduced during the quarter, including pilot programs with banks.
“This type of loan contributed the vast majority of consumer loans this quarter, and is our key focus as it has a bigger Total Addressable Market (TAM), wider interest from large banks and non-banks, easier tech integration and more regulatory clarity,” the company said.
Given industry data indicating a decline in asset quality for personal loans, the company is focusing on prime and super prime category customers, providing them with enhanced user experiences and competitive interest rates. This particular segment of borrowers tends to be more sensitive to pricing, potentially leading to lower take rates for Paytm as a percentage of disbursal value.
Paytm Q4 Results
Fintech firm One97 Communications, which owns the Paytm brand, on Wednesday said its loss in the fourth quarter of the financial year 2023-24 has widened to Rs 550 crore following the ban imposed by the RBI on transactions related to its payments bank.
The company had posted a loss of Rs 167.5 crore in the same period a year ago, the company said in a regulatory filing.
“Our fourth quarter FY24 results were impacted by temporary disruption on account of UPI transition etc. and permanent disruption because of the PPBL embargo. Paytm reported a revenue of Rs 2,267 crore, a modest decline of 3 per cent Y-o-Y (year-on-year). Our contribution margin was 57 per cent including UPI incentives, and 51 per cent excluding UPI incentives,” Paytm said in a statement.
The RBI barred Paytm Payments Bank Limited (PPBL) from accepting deposits, credit transactions or top-ups in any customer accounts, wallets, and FASTags, keeping in view the interest of customers, including merchants from March 15 onwards.
“PPBL products like the Paytm wallet and FASTag were distributed by Paytm. Due to the current embargo on these products, we anticipate the steady state annualised direct impact on EBITDA to be around Rs 500 crore, as previously disclosed. Most of this impact will be in the first quarter as these products were operational during most part of the fourth quarter of FY24,” the statement said.
The company during the reported quarter wrote off Rs 227 crore investment for a 39 per cent stake in PPBL following future uncertainties associated with the bank’s business operations including the uncertainty of any other regulatory development etc.
“PPBL, the management, on a prudent basis, has determined that the value of the company’s investment in PPBL is impaired and, accordingly, has recorded an impairment provision of Rs 2,271 crore, representing the carrying value of its investment in PPBL and disclosed the same as impairment of investment in associate,” the company said in an audit note.
Paytm Founder and CEO Vijay Shekhar Sharma holds 51 per cent in PPBL.
The company for the first time posted operational profit before Employee Stock Ownership Plan (ESOP) cost for the full year.
“FY24 has been a landmark year for the company as we achieved our first full year of EBITDA before ESOP profitability (since IPO) of Rs 559 crore. We demonstrated strong revenue momentum (up 25 per cent) and continued our disciplined focus on profitability (EBITDA before ESOP margin up by 8 per cent), in spite of regulatory action on our associate entity, Paytm Payment Bank Ltd,” Sharma said in a letter to shareholders.
The revenue from operations of Paytm declined by 2.8 per cent to Rs 2,267.1 crore during the reported quarter from Rs 2,464.6 crore in the corresponding quarter of the financial year (FY) 2023.
Paytm said that there were temporary disruptions in operating metrics like Monthly Transacting Users (MTU), merchant base, and Gross Merchandise Value (GMV) during February and March.
“This is expected to have an incremental EBITDA impact of Rs 100-150 crore, in the first quarter of FY25 and should start recovering from the second quarter as we are seeing stabilisation or growth in consumer and merchant base metrics from April/May,” the statement said.
For the year ended March 31, 2024, the company’s loss narrowed to Rs 1,422.4 crore. Paytm had recorded a loss of Rs 1,776.5 crore in FY23.
The annual revenue of Paytm increased by about 25 per cent to Rs 9,978 crore for FY24 from Rs 7,990.3 crore in FY23.
The company expects the full financial impact of disruption in the fourth quarter to be visible in the June 2025 quarter.
“We expect first quarter of FY 2025 revenue of Rs 1,500-1,600 crore,” the statement said.
Paytm estimates its EBITDA before ESOP to be in the negative zone of Rs 500 to Rs 600 crore.
“We are confident of seeing meaningful improvement starting from the second quarter of FY25, based on restarting certain paused products and achieving steady growth in operating metrics.” the statement said.
For FY24, the company reported a 25 per cent increase in revenue, due to GMV growth, device additions, and growth in the financial services distribution business.
“Net payment margin has gone up 50 per cent to Rs 2,955 crore due to increase in payment processing margin and increase in merchant subscription revenues,” the statement said.
The GMV of Paytm increased by 30 per cent to Rs 4.7 lakh crore during the reported quarter from Rs 3.6 lakh crore a year ago.
Paytm received UPI incentives of Rs 288 crore for FY24, as compared to Rs 182 crore in FY23.
“The financial services business reported a 30 per cent revenue increase due to growth in the value of loans distributed on our platform. The Marketing services business reported 14 per cent growth to Rs 1,738 crore, impacted by the lower MTUs in February and March,” the statement said.
Paytm’s contribution profit increased by 42 per cent to Rs 5,538 crore, driven by growth in net payment margin and higher-margin financial services business.
The company calculates contribution profit after excluding payment processing charges, promotional cashbacks, incentives etc.
Despite the disruption in operations, the average monthly transacting users of Paytm grew by 7 per cent to 9.6 crore from 9 crore a year ago and merchant subscriptions grew by 58 per cent on Y-o-Y basis to 1.07 crore.
“Merchant subscription revenue in the fourth quarter was about Rs 90 per device per month and we expect it to bottom out at about Rs 80 in the first quarter of FY25, post which it should increase towards Rs 100 by the fourth quarter of FY25,” the statement said.
Ripunjai Gaur, Chief Business Officer, Offline Payments, has been designated as senior management personnel of the company.
