Paytm wrote off its investment in Paytm Payments Bank Limited (PPBL) for Rs 227.1 crore and recorded it as impairment losses.
Today, Paytm released its Q4FY24 results, where its loss widened to Rs 550 crore from Rs 168 crore a year ago in the March quarter. The fintech platform’s revenue from operations was also reduced by 2.9 percent year on year (YoY) to Rs 2,267 in Q4 FY24. It was Rs 2,334 crore in the same period last year. The company also said in a regulatory filing that it wrote off its investment in Paytm Payments Bank Limited (PPBL) for Rs 227.1 crore and recorded it as impairment losses.
In a regulatory filing, the company mentioned that their Q4 FY 2024 results were impacted because of temporary disruptions on account of the UPI transition and permanent disruptions due to the Paytm Payments Bank Limited (PPBL) embargo. On January 31, the RBI imposed restrictions on PPBL due to persistent “non-compliance with KYC practices.”
The services that were prohibited include accepting deposits, top-ups in wallets, and customer accounts. Similarly, PPBL could no longer offer FASTags to customers. Since then, a lot has happened. In March, Paytm got permission from the National Payment Corporation of India (NPCI) to act as a third-party payment aggregator. Following this, Paytm roped in Axis Bank, HDFC Bank, State Bank of India, and Yes Bank to act as payment system provider banks.
The company started transitioning @paytm handles to these banks in April. Talking about the transition, Paytm’s Vijay Shekhar Sharma said in a regulatory filing, “I am happy to share that we have successfully transitioned our core payment business from PPBL to other partner banks.”
With so much happening around PPBL, the Q4 FY24 results also talked extensively about the same.
Loss on Impairment
As per the company, their financials were impacted when it wrote off its investment in Paytm Payments Bank Limited (PPBL) for Rs 227.1 crore and recorded it as impairment losses.
In a regulatory filing, the company said, “The business of PPBL has been significantly impacted by the RBI action as described above.” Due to the future uncertainties affecting PPBL's business operations, which include potential further regulatory changes and reduced operations of primary products like savings accounts, current accounts, and wallets, the company decided that the value of the company's investment in PPBL is impaired. As a result, they have recorded an impairment provision of Rs 227.1 crore.
Transition from PPBL
Paytm is now using the tagline ‘Now, better with the power of 4 banks’. In a regulatory filing, the company said that currently, they are providing the following collaborations:
1. Providing TPAP UPI services to current UPI users and merchants, as well as new merchant onboarding.
2. Offering retailers card acceptance services that include card acquisition and BIN sponsorship.
3. Nodal or escrow accounts for money transfers to retailers.
4. Distribution of other banks' FASTags.
Impact of the embargo
PPBL's products, such as the Paytm wallet and FASTag, were distributed by Paytm. In a regulatory filing, the company said that due to the current embargo on these products, the company expects an annualized direct impact on EBITDA of approximately ₹500 crore. The majority of this impact will be felt in Q1 since these products were active for most of Q4 FY 2024.
Monthly Transacting Users Reduced
Monthly transacting users in Paytm's payment services were lower by 24 percent compared to January, as per the company. It reduces from Rs 10.4 crore in January to Rs 8 crore in April. This was because of voluntary user attrition due to the restrictions imposed by the RBI. However, in a statement, the company said that in May they witnessed stabilisation in transacting user count on a month-on-month basis.
Meanwhile, Paytm has also seen a slowdown in two of its businesses, which include consumer lending and merchant payments. Compared to a loan disbursal of Rs 15,535 crore in the December quarter, the fintech company disbursed Rs 5,799 crore in the January-March period. Paytm seems to be optimistic about the future. It remains to be seen how the company performs in the next financial quarter.