PPBL braces for regulatory headwinds, navigates revenue challenges: Report

Paytm in focus: Paytm Payments Bank Limited (PPBL) finds itself navigating turbulent waters amid mounting regulatory scrutiny. With the company being subjected to severe business restrictions by the Reserve Bank of India (RBI), it anticipates a challenging period ahead, marked by potential revenue setbacks and heightened uncertainties.

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Regulatory Hurdles and Revenue Forecast

The RBI's stringent measures on PPBL have raised concerns regarding Paytm's growth trajectory. The company foresees a notable decline in revenue for financial year 2025 (FY25), estimated at around 24 per cent, brokerage firm Motilal Oswal said in a note. Factors contributing to this projection include reduced Gross Merchandise Value (GMV), impact on wallet transactions, and the risk of losing both customers and merchants.

Strategic Partnerships

Additionally, Paytm expects a notable drop in payment processing margin as the share of high-yielding wallet business diminishes. However, the company's recent approval as a third-party app provider (TPAP) by the National Payments Corporation of India (NPCI) and strategic collaborations with leading banks like Axis Bank, HDFC Bank, SBI, and Yes Bank aim to streamline operations and ensure a smoother transition, analysts said.

Meanwhile, efforts to retain merchants and customers are underway, with Paytm facing the prospect of losing around 15-20 per cent of its merchant base. Increased marketing expenditures are earmarked for user recovery initiatives, highlighting the company's determination to weather the storm and regain lost ground.

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Amid revenue and earnings before interest, taxes, depreciation and amortisation (EBITDA) losses, Motilal Oswal analysts have revised Paytm’s target price to Rs 530, maintaining a cautious stance on the stock. 

The road ahead remains uncertain, with recovery prospects contingent upon successful business transition strategies and adherence to regulatory compliance.

As Paytm grapples with regulatory challenges and revenue forecasts, its ability to adapt and navigate the evolving regulatory landscape will be critical, the Mumbai-based brokerage firm said. 

With strategic partnerships and operational adjustments in place, the company remains focused on weathering the storm and emerging stronger in the digital payments arena. However, vigilance and proactive measures will be essential to steer through the uncertainties ahead.

As of 9:56 am, shares of Paytm were trading 0.68 per cent lower at Rs 408.35 per share, according to Bombay Stock Exchange (BSE).