Paytm's Net Loss Soars To ₹839 Cr, Shares Recover As Street Expected Worse

Shares of Paytm's parent company One97 Communications were largely flat after the firm reported its first-quarter results for the financial year 2024.

What Happened: Paytm saw its consolidated net losses widen by a whopping 135% to ₹838.9 crore from ₹357 crore in the same period last year. This is higher than the ₹549.60 crore loss reported in the March quarter. The numbers however managed to beat street expectations that predicted around ₹950 crore loss in the June quarter.

The firm's revenue from operations fell 36% to ₹1501 crore in the April-June period from ₹2,341 crore in Q1 2024 after the Reserve Bank of India's (RBI) curbs on its payments banks business. Revenue from payment services stood at ₹900 crore and revenue from financial services was ₹280 crore.

Paytm's EBITDA loss before ESOP was ₹545 crore. The company expects its revenue and EBITDA before ESOP to start improving from the second quarter of FY25 banking on growth in operating metrics and cost optimisation.

"Going forward, we expect revenue and profitability to improve, driven by growth in operating parameters such as GMV, an expanding merchant base, recovery in loan distribution business and continued focus on cost optimization," the company added.

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Paytm's Growing Pains: Paytm has been reeling under regulatory pressures on several fronts from the RBI to the Securities and Exchange Board of India (SEBI).

In January, the RBI barred Paytm Payments Bank from accepting new deposits and conducting credit transactions with customer accounts. Prepaid instruments, wallets, FASTags, and National Common Mobility Cards (NCMC) were also restricted.

The RBI’s decision followed subsequent evaluations by external auditors which highlighted non-compliance issues and significant supervisory concerns within the bank.

RBI's restrictions took effect from February 29. The embargo on PPBL products did not have a significant impact on its results in the last quarter because most of the products were operational during the period. The company had then said it expected the impact to be felt in Q1 of FY25.

Earlier this month, Paytm's parent firm received a warning letter from SEBI outlining that certain transactions in FY22 between Paytm and the now-defunct Paytm Payments Bank were carried out without the necessary approvals.

The related party transactions, amounting to ₹324 crore and ₹36 crore did not have the due approval of either the the audit committee or the shareholders, SEBI said. Paytm refuted SEBI's warning saying it has consistently adhered to all listing regulations. It would address SEBI’s concerns with a detailed response, the company had then said.

Price Action: One97 Communications was trading 0.85% higher at ₹449.10 on Friday.

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