Paytm Q4 loss widens 71.6 pc; higher expenses eat into strong revenue growth

One 97 Communications Ltd, the parent company of fintech firm Paytm, on Friday reported its results for the fourth quarter ending March 31, 2022. Its shares have fallen nearly 60 percent this year, as of close on May 19.
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One97 Communications Ltd, Paytm's parent company, said on Friday its net loss for the fourth quarter widened by 71.6 percent to Rs 763 crore as expenses ate into the fintech company's solid topline growth.

Its consolidated net loss was Rs 444 crore in the year-ago period.

Revenue from operations jumped 89 percent to Rs 1,541 crore in the fourth quarter ended March 31, 2022, with growth remaining strong across its biggest businesses, vis-a-vis payment services to consumers and merchants.

Marketing expenses and employee costs during the full-year 2022 ate into the company's profits, Paytm said.

"As we enter FY 2023, we expect to achieve significant operating leverage, and the trajectory of EBITDA improvement to steepen," the company said.

In a letter to shareholders, Paytm Founder and CEO Vijay Shekhar Sharma had previously outlined that the Noida-based company, whose shares erased nearly 60 percent of their market value this year, expects to turn a profit in 2023.

The company's shares have seen steep declines – over 70 percent, as of Friday's close – from their IPO price of Rs 2,150, following a dismal stock market debut.

Vijay Shekhar Sharma, Founder and CEO, Paytm

On Friday, shares closed 3.30 percent higher, at Rs 572, after a week of gains following strong business update for the month of April.

What marred Paytm's profitability were its expenses.

Total expenses in the fourth quarter rose 77.7 percent to Rs 2,372 crore, with costs relating to employee benefits accounting for 36 percent of the total expenditure.

The fintech company's lending business–a unit it is actively trying to grow–disbursed 5X more loans in the fourth quarter versus the year-ago period.

Growth was seen across lending products, including Buy Now Pay Later (Paytm Postpaid), personal loans, and merchant loans.

Equity analysts have pointed out that Paytm’s lending business is a solid growth contributor, especially because of its reach in lower-tier cities and towns.

However, Paytm was dealt a big blow earlier this year after the Reserve Bank of India banned Paytm Payments Bank from onboarding any new customers following allegations of data leaks to Chinese firms.

Research firm Macquarie, in a note where it slashed the company’s target price, said the RBI ban significantly reduced Paytm’s probability of getting a banking license to lend, and that “regulatory headwinds, from the central bank's regulations on digital payments, BNPL and stricter KYC and compliance norms could further cloud Paytm's path towards profitability.”

Paytm, in its latest quarterly report, said that Paytm Payments Bank “continues to engage with the RBI in addressing concerns and observations.”

“We do our lending distribution business in strict compliance with the existing digital lending guidelines as prescribed by the regulator in June 2020, and we are further strengthening our partnerships with blue-chip lending institutions we work with," it said, adding Paytm Payments Bank is pursuing initiation of an IT audit.

The Noida-headquartered firm was founded in 2010 as a mobile recharge platform, which grew after Uber Technologies Inc listed it as one of the payment options in India. It saw immense traction in 2016 after the Indian government suddenly banned high-value currency notes of Rs 500 and Rs 1,000, prompting many consumers to shift to transacting on Paytm amid a shortage of cash.

(This story has been updated with more details.)

Edited by Kanishk Singh