Indian digital payments platform Paytm warned of job cuts on Wednesday after reporting its net loss widened in the fourth quarter as faces recent regulatory crackdown.
One 97 Communications, Paytm’s parent company, said it hopes to cut employee expenses and reduce its annual staff costs by $48 million to $60 million.
The company, once the most valuable Indian 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 decreased approximately 3% to $272.4 million from $280.4 million in the same period.
In February, India’s central bank banned the company’s banking partner and its sister company, Paytm Payments Bank, to carry out banking activity since March. That brought Paytm’s many banking services to a sudden halt, and the company was forced to sign new partnerships with other banks to keep many of those services running.
Paytm said it also took an impairment charge of $27.2 million related to its investment in Paytm Payments Bank in the quarter.
In the full year ended March, Paytm’s revenue rose 25% to $1.19 billion from a year earlier, although higher payment processing charges, marketing costs, employee benefit charges and cloud software affected their results. As a result, the net loss widened to $170 million from a loss of $213 million a year earlier.
Paytm’s results include “enough data points to suggest that 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, 1QFY25 is likely to be the lowest as it would reflect the full steady-state impact lower (vs. 2-month impact in 4QFY24).”
However, analysts warned that Paytm’s payments GMV has fallen by about 20% and that the company’s expectations for its payment processing margin have also declined, which together “translates to a hit of almost 50% to the payment margins”. However, they estimated that Paytm’s business loan volumes increased in March and April, a clear sign of revival.
Paytm had around $1.03 billion in the bank as of March 31. The company’s shares fell about 1% on Wednesday afternoon to Rs 349.20, giving it a market capitalization of $2.64 billion. Paytm went public in 2021 with a valuation of $20 billion.
“I am pleased to share that we have successfully transitioned our core payments 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,” said Paytm Founder and CEO Vijay Shekhar. Sharma, in the company’s annual letter to shareholders.
“It has been possible in such a short period of time with the extensive support of the Regulator, NPCI, the Bank’s partners and our committed teammates. “Our government and regulator’s unwavering commitment to supporting innovation and financial inclusion keeps us true to our mission and committed to our long-term sustainable growth opportunity,” he added.