By Dimpal Gulwani and Siddhi Nayak
(Reuters) – India’s Paytm barely slowed its second-quarter revenue decline, while its user base shrank in its key digital payments business, pointing to a slower-than-expected recovery from the shutdown of its banking unit ordered by the central bank.
Shares of Paytm, which in May had forecast a “significant improvement” in revenue and profitability compared to the second quarter, fell 7.7% on Tuesday.
The country’s financial regulator shut down Paytm’s banking unit in January due to ongoing compliance issues, raising concerns about its key digital payments business and triggering a collapse in the stock.
And while Paytm has obtained regulatory approval to operate as a third-party app for its existing digital payments customers, it is yet to get permission to sign up new customers.
As a result, the number of monthly transacting users fell 25% year-over-year to 71 million, and down about 9% from the previous quarter.
Its payments revenue fell 37% in the second quarter, exactly as in the previous quarter, while its contribution to overall revenue fell from around 59% to 57%.
Paytm’s overall revenue, which also includes its lending business, fell 34%, slightly less than the 36% drop in the previous quarter.
Separately, the company said it will provide a default loss guarantee (DLG) of up to Rs 2.25 billion to its lending partner SMFG India Credit Co for loans extended to traders.
Paytm expects the DLG model to bring in more capital to disburse loans to merchants and is open to using this model with more lending partners, although not all lenders have requested it, said management during a call with analysts.
Its contribution margin, a measure of revenue minus cash back and fees such as payment processing, increased sequentially from 50% to 54%.
Paytm reported a net profit of 9.28 billion rupees, its first since its listing in 2021. But that was mainly due to a gain of 13.45 billion rupees on the sale of its ticketing business to the delivery company of Zomato food.
Excluding that and excluding taxes, its loss was 4.07 billion rupees in the second quarter, less than 8.39 billion rupees in the previous quarter but higher than the 2.73 billion rupees a year earlier. ($1 = 84.0500 Indian Rupees)
(Reporting by Dimpal Gulwani in Bengaluru; editing by Janane Venkatraman, Dhanya Skariachan and Savio D’Souza)