Paytm to hive off wallet business: Report

Beleaguered payments company Paytm is said to be in advanced talks with multiple players to sell its wallet business, according to media reports. This follows the Reserve Bank of India’s order barring it from accepting fresh deposits or top-ups with effect from February 29, 2024. 

The Hindu Business Line reported that Jio Financial Services and HDFC Bank were frontrunners for the deal, according to the report.

In response to specific queries sent by YourStory, a spokesperson for Paytm Payments Bank Limited said, "We do not comment on any market speculation. We completely abide by the direction of the regulator, and the team's effort is to ensure a smooth customer experience with the products offered by PPBL."

The share price of Jio Financial Services jumped by 15.21% on the back of the news, closing at Rs 292.40 per share. However, the shares of HDFC Bank saw a small dip of 0.21% at the end of the day’s trade, settling at Rs 1,443.05 per share.

According to an analyst call held on February 1 by One 97’s management to respond to concerns around the RBI order, the contribution of wallet business to One 97’s GMV is in single digit, and therefore smaller than its UPI, cards and lending business.

“It’s a reasonably profitable product because we get MDR and we get “add money to wallet” charges. So there was a sharing of revenue which will now get impacted until the time we are able to have an alternative available on the Paytm app for users to either open a new wallet with any other user or through the Paytm app and/or migrate these wallets if that is a possibility as per the regulator,” said Bhavesh Gupta, President and COO at Paytm during the call. 

The RBI order disallows further deposits or credit transactions or top-ups in any customer account, PPI, wallet, FASTags, NCMC cards, and others after February 29, 2024. The order also states that withdrawal or utilisation of balance by Paytm customers from their savings bank account, current accounts, and other instruments will continue to be permitted up to the available balance. 

The order also asks for nodal accounts of One 97 Communications and Paytm payment Services to be terminated at the earliest from PPBL and all pipeline transactions to be completed by March 15, 2024. 

Overall, the directive by RBI on PPBL is estimated to impact the listed entity, One 97’s annual EBITDA by a factor of Rs 300-500 crore. The company reported losses of Rs 222 crore for the quarter of October to December 2023 on the back of a 38% rise in revenue at Rs 2,850 crore. The revenue numbers were reflective of an increase in loan disbursal and a greater number of transactions through the platform during the peak festive season covering Dusshera and Diwali. 

(The story was updated to reflect the statement shared by PPBL.)