News

Published: February 2, 2024
Updated: February 2, 2024

Paytm Faces Substantial Impact on Earnings Following RBI Restrictions ; stock hits Lower circuit

In a recent development, One97 Communications Ltd., the parent company of the popular payments aggregator Paytm, anticipates a noteworthy blow to its annual Earnings before Interest, Tax, Depreciation, and Amortisation (EBITDA) ranging from ₹300 crore to ₹500 crore. This projection comes in the wake of the Reserve Bank of India's (RBI) directives impacting Paytm Payments Bank.

Financial Implications and Commitment:

Despite the anticipated impact, One97 Communications asserts its commitment to enhancing profitability. The company reported an EBITDA of ₹219 crore for the December quarter, marking a net loss reduction from ₹392.1 crore to ₹221.8 crore compared to the previous year.

Immediate Steps in Compliance:

In response to the RBI's directives, Paytm Payments Bank is taking immediate measures to align with regulatory requirements. The company emphasises collaboration with the regulator to promptly address concerns and ensure compliance.

User Deposits Remain Unaffected:

One97 clarifies that the RBI directives do not affect user deposits in various accounts, including savings accounts, wallets, FASTags, and NCMC accounts. Existing balances in these accounts remain usable, providing assurance to users.

Strategic Shifts and Collaborations:

One97 outlines a strategic shift, indicating its intention to collaborate with other banks instead of Paytm Payments Bank. The company plans to expand its payments and financial services business exclusively through partnerships with other financial institutions.

Business Continuity:

Certain aspects of Paytm's business, such as the Payment Gateway business, offline merchant payment network offerings, and other services like loan distribution, insurance distribution, and equity broking, remain unaffected by the regulatory decision. The company affirms its commitment to continue these operations seamlessly.

Founder's Position and Corporate Governance:

Founder Vijay Shekhar Sharma's financial position is clarified, stating that he has not taken margin loans or pledged any shares directly or indirectly owned by him. The company assures that despite its board presence in Paytm Payments Bank, it exerts no significant influence on its operations.

Market Response and Share Performance:

The Reserve Bank of India's directive has led to a decline in Paytm's shares, currently trading 65% below its IPO price of ₹2,150. Analysts, including those at Macquarie, express caution, citing potential significant revenue and profitability implications in the medium to long term.

As Paytm navigates through the impact of RBI restrictions, the company remains resilient, taking swift steps to comply and adapt to the evolving regulatory landscape. The unfolding scenario underscores the complexity of the digital payment sector and the importance of robust corporate governance in navigating challenges. Observers will closely monitor Paytm's strategic moves and responses in the aftermath of these regulatory developments.