- Reports staggering 25% year-on-year decline in monthly transacting users, now at merely 71m.
- Paytm’s payments business plummet by 37% while its overall revenue contracts by 34%.
India’s Paytm, a prominent player in the digital payments landscape, has disclosed its financial results for the second quarter, revealing a landscape marked by persistent challenges and unmet expectations.
Despite an initial forecast in May predicting a “meaningful improvement” in revenue and profitability, the company’s performance fell short, prompting a significant decline in its stock price by as much as 7.7 per cent.
The downturn underscores the substantial hurdles the fintech firm continues to face, particularly in light of regulatory interventions and shifts in its operational landscape.
One crucial factor contributing to Paytm’s difficulties is the impact of the Reserve Bank of India’s (RBI) decision to shutter its banking unit in January due to ongoing compliance issues.
Competitive market
The move not only raised concerns about the viability of its digital payments operations but also instigated a considerable drop in user engagement.
Paytm reported a staggering 25 per cent year-on-year decline in monthly transacting users, now at merely 71 million, contrary to the growth needed for robust performance in a competitive market.
Additionally, revenue from Paytm’s payments business plummeted by 37 per cent, mirroring the decline observed in the previous quarter, while its overall revenue contracted by 34 per cent.
Interestingly, while Paytm declared its first-ever net profit since going public in late 2021, this achievement was predominantly attributable to a one-time gain from the sale of its event-ticketing business to Zomato.
Ongoing financial instability
Excluding this gain, Paytm still faced significant operational losses, reporting a deficit of Rs4.07 billion, slightly improved from the previous quarter but nonetheless indicative of ongoing financial instability.
Despite the regulatory approval allowing Paytm to continue serving as a third-party app for existing digital payment customers, the inability to acquire new users further exacerbates its revenue decline and undermines its market position.
The incremental improvement in contribution margin, rising to 54 per cent from 50 per cent, is slight in contrast to the broader challenges surrounding user retention and revenue generation.