Indian digital payments platform Paytm warned of job cuts on Wednesday after it said its net loss widened in the fourth quarter as it faces a recent regulatory crackdown.
One 97 Communications, Paytm’s parent company, said it expects to cut employee expenses and reduce annual staff costs by $48 million to $60 million.
The company, once India’s most valuable startup, reported a net loss of $66.1 million in the fourth quarter ended March 2024, compared with a loss of $20.11 million a year earlier. Revenue fell about 3% to $272.4 million from $280.4 million in the same period.
India’s central bank in February barred the company’s banking partner and sister company, Paytm Payments Bank, from banking since March. This led to a sudden shutdown of many of Paytm’s banking services and the company was forced to forge new partnerships with other banks to keep many of these services running.
Paytm said it also took an impairment charge of $27.2 million related to its investment in Paytm Payments Bank during the quarter. In the quarter ended June this year, Paytm projected its revenue to be between $180 million and $192 million.
During the year ended March, Paytm’s revenue rose 25% to $1.19 billion from a year earlier, though higher payment processing fees, marketing costs, employee benefit charges and expenses cloud software burdened its value. As a result, the net loss widened to $170 million from a loss of $213 million a year earlier.
Paytm’s results include “several data points that suggest the business has bottomed out in terms of payment volumes and user/merchant traction,” Bernstein analysts said in a note to clients. “Though from a financial metrics perspective, 1Q05 is likely to be the bottom as it will reflect the full impact of the lower steady state (vs 2 months impact in 4Q24).”
Analysts, however, warned that Paytm’s payments GMV has fallen by around 20% and the company’s expectations for its payment processing margin have also come down, which together “translates into a nearly 50% hit to payment margins”. They did, however, note that Paytm’s trade loan volume increased in March and April – a clear sign of revival.
Paytm had about $1.03 billion in the bank as of March 31. The company’s shares were down about 1% on Wednesday afternoon at ₹349.20, giving it a market capitalization of $2.64 billion. Paytm went public in 2021 at a valuation of $20 billion.
“I am happy to share that we have successfully transferred 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 the strength of our platform around customer and merchant engagement,” Paytm founder and CEO Vijay Shekhar Sharma said at the annual letter from the company’s shareholders.
“It was possible in such a short period of time with the extensive support from the Regulator, NPCI, the Bank’s partners and our dedicated teammates. The unwavering commitment of our government and regulators to support innovation and financial inclusion keeps us true to our mission and committed to the long-term sustainable growth opportunity,” he added.
