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Business News/ Companies / News/  Paytm warns of job cuts as sales slide, revenue down 2.7% amid RBI action on payments bank arm, says report
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Paytm warns of job cuts as sales slide, revenue down 2.7% amid RBI action on payments bank arm, says report

Paytm Q4 Results: Fintech startup Paytm saw its first-ever decline in sales this quarter amid the RBI probe. Bloomberg has reported the unicorn could cut jobs and trim non-core assets amid the sales and revenue decline.

Paytm, founded by then-celebrated Indian entrepreneur Vijay Shekhar Sharma in 2010, is struggling to recover after a finance watchdog in January ordered a key banking affiliate to wind down. (Bloomberg)Premium
Paytm, founded by then-celebrated Indian entrepreneur Vijay Shekhar Sharma in 2010, is struggling to recover after a finance watchdog in January ordered a key banking affiliate to wind down. (Bloomberg)

Fintech unicorn Paytm has announced potential job cuts and plans to trim non-core assets following its first-ever decline in sales on May 22, Bloomberg reported. This comes after a regulatory probe into the startup's financial arm Paytm Payments Bank (PPBL) by the Reserve Bank of India (RBI) significantly impacted the company's operations.

The fintech pioneer, once a symbol of India’s startup success, reported a net loss of 550 crore in the quarter ended March 2024, while its revenue from operations in Q4FY24 dipped 2.6 percent to 2,267.10 crore, marking its first drop since its 2021 stock-market debut. Shares fell by as much as 2 percent.

Also Read | Paytm Results: Read full text of Vijay Shekhar Sharma’s letter to shareholders

Regulatory Challenges

Founded by Vijay Shekhar Sharma in 2010, Paytm has faced difficulties since the central bank in January ordered its financial subsidiary to shut shop, the Bloomberg report said. This has damaged Paytm’s reputation and led to concerns that customers might switch to competitors such as Walmart Inc.’s PhonePe and GooglePay, it added.

Despite the challenges, Paytm stated it was profitable before interest, taxes, depreciation, and amortisation, excluding employee incentives. However, it warned of further revenue declines to 150-160 crore in the June quarter, but anticipated “meaningful improvement" thereafter. The company plans to streamline operations, reduce employee costs, and trim non-core businesses.

Also Read | Paytm Results: From widening losses to Payments Bank update, 10 key highlights from Q4 earnings

Competitive Landscape

Paytm competes with financial services from Amazon.com Inc., Alphabet Inc.’s Google, and Mukesh Ambani’s Jio Financial Services Ltd. The company's shares have halved in value since the government ordered PPBL to halt key operations, citing non-compliance. Although PPBL is part of Sharma’s fintech empire, it is not controlled by Paytm.

Bloomberg analyst Nathan Naidu predicts a strong comeback for Paytm in fiscal 2026, driven by its payment services and user acquisition. 

“Paytm is poised for a strong sales and margin comeback in fiscal 2026 from a past mired in regulatory woes, driven by a long runway and strong user-acquisition funnel from payments. Its share in Indian digital payments, albeit less dominant than Walmart’s PhonePe and Google Pay, could remain steady, helping it reach its 500-million user target. Regulatory woes should ease with a new license for payments, its bread and butter, with the segment’s margin set to widen on system optimization and its integrated offerings. Loan, insurance and advertising might catalyze sales for the Ant Financial-backed firm," Naidu said.

Also Read | Paytm Results: From near-term financial hit to job cuts, 5 highlights from Vijay Shekhar Sharma's letter to shareholders

Impact on User Base and Loans

Paytm reported losing about 4 million monthly transacting users during the March quarter. The company disbursed 57.76 billion rupees in loans, a significant drop from 155.35 billion rupees in the previous quarter.

In a letter to shareholders, Sharma acknowledged the short-term financial impact on revenue and profitability due to business disruptions in Q4. He noted that while the PPBL wallet and some other payment and loan products were paused, many of these services are now being restarted.

(With inputs from Bloomberg)

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Published: 22 May 2024, 12:34 PM IST
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