Paytm Faces Revenue Decline: Analysis by Motilal Oswal

Following the Reserve Bank of India’s (RBI) judgment to impose business restrictions on Paytm Payments Bank Limited (PPBL) over regulatory concerns, Motilal Oswal Financial Services predicts a significant revenue decline for Paytm in FY25.

Revenue Projection by Motilal Oswal Report:

In an analysis report, Oswal states, “We remain watchful on the ongoing business transition and Paytm’s ability to recover lost business and resume growth trajectory over FY25-26E. We thus estimate FY25E revenue to decline by 24 percent percent, while contribution profit declines 30 percent percent.”

The report mentions that the company’s contribution margin is expected to be 51 percent, with Motilal Oswal maintaining a neutral stance on the stock pending Q4 results.

Potential Loss of Customers and Merchants:

The imposed restrictions could lead to Paytm’s loss of customers and merchants, with the company possibly losing 15-20 percent of merchants, although the impact on customers may be moderate.

Earlier this month, the National Payments Corporation of India (NPCI) approved Paytm’s parent company, One97 Communications Ltd (OCL), to operate as a third-party UPI app under the multi-bank model, with YES Bank, State Bank of India, HDFC, and Axis Bank included.

Projected Revenue Decline by Motilal Oswal:

Motilal Oswal also forecasts a major decline in the company’s revenue, expected to fall by 27 percent, primarily attributed to a projected 28 percent cut in payment processing margin to a range of ~7bp due to reduced business volumes. 

They expect a gradual recovery in GMV growth, estimating ~20 percent CAGR over FY25-27E compared to ~45 percent CAGR during FY22-24E.

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