Shares of One 97 Communications, the parent firm of Paytm were falling on Wednesday after the troubled fintech company’s losses deepened in the March quarter, hit by restrictions on its banking arm.

What Happened: Paytm’s consolidated net loss widened to ₹549.60 crore in the quarter ended March 31, versus a loss of ₹168.90 crore in the same period last year.

Revenue from operations fell 3% year on year to ₹2,267.10 crore, down from ₹2,334.50 crore in the same quarter the previous year. Paytm attributed its disappointing results to temporary disruptions related to the UPI transition and a permanent disruption due to the Paytm Payments Bank (PPBL) embargo.

The company impaired the carrying value of its investment in PPBL in the latest earnings release.

Paytm’s contribution margin was 57%, including UPI incentives, and 51% excluding them. Its EBITDA before ESOP was ₹103 crore, including UPI incentives, but dropped to minus ₹185 crore excluding them.

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More Pain Ahead: The embargo on PPBL products like the Paytm wallet and FASTag are expected to have a significant annualised direct impact on EBITDA of ₹500 crore. Most of this impact will be felt in the first quarter of FY2025, as these products were operational for most of the fourth quarter of 2024.

Temporary disruptions in operating metrics during February and March are anticipated to add an incremental EBITDA impact of ₹100 crore-₹150 crore in Q1 FY2025, with recovery expected from Q2, the company said.

Paytm remains confident about returning to previous growth trends in its merchant and consumer base and is in talks with the National Payments Corporation of India (NPCI) to sign up new UPI consumers for its TPAP App. The company said it has taken conservative measures in line with regulatory guidance, pausing certain payments and loan distribution businesses.

These actions are expected to have an incremental EBITDA impact of ₹75 crore-₹100 crore in Q1 FY2025, with recovery in subsequent quarters.

Job Cuts To Curb Losses? The company also said that employee costs have increased in recent years due to investments in technology, merchant sales, and financial services. Paytm expects reductions in other employee costs, aiming for annualised people cost savings of ₹400 crore-₹500 crore.

Paytm expects Q1 FY2025 revenue to be between ₹1,500 crore and ₹1,600 crore and EBITDA before ESOPs to be minus ₹500 crore-₹600 crore. The company anticipates improvement starting in Q2 FY2025 by restarting paused products and a rebound in operating metrics.

Price Action: Shares of Paytm recovered from early losses to edge 0.16% higher to ₹352.25 in morning trade on Wednesday.

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