Foreign Brokerage Union Bank of Switzerland (UBS) said the recent RBI FAQs have mitigated the worst-feared outcomes for One 97 Communications Limited (Paytm), as it expects Paytm to retain a large part of its customer and merchant base post certain approvals from the National Payments Corporation of India (NPCI).
That said, a 15-20 percent churn in merchants, customers and devices is likely in the March quarter (Q4) over the December quarter, along with a 60 percent Quarter on Quarter (QoQ) decline in loan origination, UBS said. It also expects FY25 to be weak and bake in a 2 percent revenue decline, due to wallet business loss and only gradual normalization in payments and loan origination businesses.
UBS said Paytm will likely experience near-term financial impact on its business along with some permanent loss of business in FY25E. It sees Paytm losing 5-7 percentage points of its 25 percent share in payments industry, driven by loss of wallet (2-3 percentage permanent loss) and the rest due to merchant or customer churn.
It estimates net payments margin to decline to 6-7 basis points range from 7-9 basis points range, given loss of high-margin wallet business and likely easier terms to retain merchants. Loan origination will likely be paused for most of Q4 and then only pick up post stabilization of payments business in FY25E.
