Paytm anticipates a ₹300-500 crore “worst case” impact on its annual Ebitda after the Reserve Bank of India imposed tough restrictions on its payments bank, which analysts see as having serious implications for the overall company.
Shares of One97 Communications Ltd, Paytm’s parent company, fell 20% in early trading on Thursday, a day after the regulator barred Paytm Payments Bank Ltd, or PPBL, from accepting deposits or top-ups in any customer account, digital wallets, or FASTag accounts after 29 February.
Paytm narrowed its Ebitda loss, before accounting for employee stock ownership, to ₹176 crore in FY23 from ₹1,518 crore in the year before. Ebitda, or earnings before interest, tax, depreciation, and amortisation, is a key measure of operational efficiency.
Brokerage Macquarie said it expects RBI’s restrictions on Paytm Payments Bank to severely hamper the company’s ability to sell payment and loan products, and retain customers.
“We think revenue and profitability implications in the medium- to long-term could be significant and remain a key item to monitor,” Macquarie analyst Suresh Ganapathy said in a note.
“We do not see any near-term solution to these problems, and this effectively means, in our view, that RBI is indirectly revoking the PPI (pre-paid instrument) licence of Paytm,” Ganapathy said.
“The bigger issue is Paytm has not been on the good books of the regulator and going forward their lending partners also could possibly re-look at the relationships.”
RBI said on Wednesday that the nodal accounts of One97 Communications and Paytm Payments Services Ltd will also have to be terminated by 29 February.
Paytm said on Thursday that it is taking immediate steps to comply with RBI’s directions and address its concerns. RBI had initially directed PPBL to stop onboarding new customers in March 2022.
Brokerage Jefferies estimates more than a 20% revenue loss on Paytm’s lending business if the company’s lending partners limit business due to operational or governance risks.
In terms of FASTag accounts, where Paytm is the third-largest player with a market share of 17% and 58 million customers, will also be majorly affected, the brokerage said.
“We estimate that these (affected) segments would be sub-10% of segments’ revenue and 5% of overall revenues,” Jefferies analyst Jayant Kharote said in a note.
While Paytm’s management has not indicated the contribution from its various segments, its payments business is estimated to account for about half of its total revenue.
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