Shares of Indian fintech pioneer Paytm plunged as much as 7.8% on Tuesday after the company reported a 34% decline in revenue for the second consecutive quarter, signaling ongoing difficulties in recovering from a regulatory clampdown.
Paytm’s revenue dropped to 16.6 billion rupees ($197 million) in the latest quarter, even as the company posted its first-ever net income. However, much of that profit came from a 13.5 billion rupee gain from the sale of its events ticketing business to Zomato Ltd.
Despite the positive earnings, Paytm faces significant long-term challenges. The firm is grappling with the aftermath of a regulatory crackdown in early 2024, which severely impacted its stock performance and disrupted key parts of its business. Competing with major players like Google in the digital payments space, Paytm is struggling to retain users while expanding into new areas such as loans.
Paytm’s banking affiliate was nearly shut down by Indian regulators following concerns about unregulated data flows, which disrupted payments processing and forced the company to form new partnerships with other lenders. The firm is still awaiting approval from India’s central bank to stabilize its operations.
The company has responded by trimming its workforce and selling its movie and events ticketing business to sharpen its focus on payments, cash-back offerings, and financial services distribution like loans. These initiatives aim to broaden its merchant base and boost revenue.
Despite these efforts, Paytm’s stock remains down more than 60% from its initial public offering (IPO) price in 2021, though it has recovered some losses since its February plunge. The firm reported net income of 9.3 billion rupees for the September quarter, surprising analysts who had forecast a loss of 6.3 billion rupees.
Paytm’s monthly transacting user base also fell from 78 million to 71 million during the quarter as the company migrated users to payments services in partnership with banks. However, it disbursed 33 billion rupees in merchant loans, marking a 33% increase from the previous quarter.
Founded by Vijay Shekhar Sharma, Paytm was once India’s most valuable startup, attracting high-profile backers like Alibaba’s Jack Ma, SoftBank’s Masayoshi Son, and Berkshire Hathaway’s Warren Buffett. The company continues to face stiff competition in India’s crowded digital payments market from Walmart’s PhonePe, Google, and Mukesh Ambani’s Jio Financial Services.
