"Learned from mistakes": Paytm CEO aims for better governance as losses mount
During an extended earnings call, CEO and Founder Vijay Shekhar Sharma said Paytm will hire more independent directors and subject experts to bolster governance and compliance.
Paytm parent One 97 Communications has had a rough 2024 so far. Due to regulatory sanctions from the Reserve Bank of India (RBI), the fintech player had to stop all operations at its subsidiary Payments Bank, which led to impairment losses of Rs 227 crore.
In the January-March quarter, its losses soared over three-fold year-on-year (YoY) to Rs 550 crore while revenues dipped 2.8% YoY to Rs 2,267 crore.
During an extended earnings call, CEO and Founder Vijay Shekhar Sharma said that the company has learned from its mistakes and will be hiring more independent directors and subject experts to bolster governance and compliance.
“We learnt a lot of lessons and have shown resilience in the last three months. The worst is behind us,” Sharma said in the call post the Q4 results, adding "...many of our teammates went through the test of time where they learnt what was needed to be done. As a 'Paytmer', I couldn’t be more proud of their commitment."
In its earnings release, the company announced that Paytm will "pivot" to focusing more on a distribution-only credit model (where Paytm is not responsible for collections and, therefore, receives no collection incentive). However, the company clarified during the call that this is only a temporary measure, necessitated by macroeconomic conditions affecting repayments. The company also revealed that it is experimenting with secured loans, including microloans, against property for smaller merchants.
"If this becomes a permanent switch, this would create a much weaker model in our view (more of a loan distribution agent (DSA) than a partner that adds more value as Loan Service Provider)," brokerage and research firm Bernstein noted in its report.
In the first four months of 2024, Paytm’s user base shrank by 24% to 80 million, while the count of its active devices dropped by about 1 million over February and March on account of attrition, the company said.
During the earnings call, the company said it will deploy some of its cash reserves to drive marketing activities to acquire more users. The company will also work to drive new merchant adoption and reactivation of inactive merchants.
The amount of money processed through Paytm's payment system, or gross merchandise value, has decreased by about 20% to Rs 4.7 lakh crore in the latest quarter.
However, excluding defunct products, the amount of money processed through consumer payments in April was back to about 85% of what it was in January. For merchant payments, it was back to about 94% of the January level. Combined, the total payment volume (GMV) is at 93% of the January value, showing signs of stabilisation.
"While the business could improve from here, the base has been moved dramatically and brings them a lot closer to their other payment peers. This puts greater pressure on the financial services and marketing segments to drive profitability," Bernstein said in an analyst note.
On obtaining a payment aggregator (PA) licence, Sharma said Paytm is waiting for the formation of the new government at the centre, which will make the decision on the PA licence in an inter-ministerial committee meeting.
The company's PA license is still pending approval.
Edited by Kanishk Singh
