After Loans, Paytm Moves To Distribution-Only Model For Insurance
The board of its wholly-owned subsidiary, Paytm Insurance Broking Pvt., has approved the withdrawal of its application with IRDAI for registering as a general insurance company.
One97 Communications Ltd., the owner and operator of payments firm Paytm on Saturday said it will move to a distribution-only model for insurance, adopting the same approach to what it announced for its loans business alongside its earnings two days ago.
The board of Paytm General Insurance, has approved the withdrawal of its application with the Insurance Regulatory and Development Authority for registering as a general insurance company.
The unit "will be moving its focus away from the capital-intensive insurance manufacturing business and withdrawing its general insurance license application. This will also enable One97 Communications to conserve cash of Rs 950 crores, which was earmarked for investment in Paytm General Insurance Ltd.," it said in an exchange filing.
The unit will now focus only on insurance distribution to Paytm consumers and small merchants and enterprises across various general insurance categories, including health, life, motor, shop, and gadgets via its wholly-owned subsidiary, Paytm Insurance Broking Pvt.
The firm's similar approach to its loan business got mixed reviews from brokerages, with Bernstein saying that a a permanent shift to distribution-only loans would create "a much weaker model", as Paytm will be more of a loan distribution agent than a partner that adds more value as loan service provider.
Emkay said lower loan disbursements and moderation in lending rates may disrupt the company's strategy of monetising payment business, while Citi said "...focus on marketing efficiencies and new distribution-monetized revenue streams are steps in the right direction to reduce regulatory risks in the business and generate profits."
Paytm reported its Q4 earnings on Thursday, with its net loss widening sequentially to Rs 551 crore in the fourth quarter ended March 2024. Even its revenue fell 20.5% quarter-on-quarter to Rs 2,267 crore. The contribution margin was 57%, including UPI incentives.
The Ebitda loss for the quarter stood at Rs 223 crore, compared to Rs 157 crore in the previous quarter. The Ebitda before ESOP for the company stood at Rs 103 crore, including UPI incentives.
Owing to the Reserve Bank of India's clampdown on Paytm Payments Bank, the company also wrote down the value of its entire investment in the bank, worth Rs 227 crore. It also guided towards a full financial impact in Q1 FY25.
