Delhi NCR-based fintech giant Paytm announced today that its associate entity, Paytm General Insurance Ltd (PGIL), is withdrawing its general insurance license application. Instead, the company is intensifying its focus on distributing insurance through its wholly-owned subsidiary, Paytm Insurance Broking Private Ltd (PIBL).
Strategic Shift to Conserve Cash
Paytm stated that this strategic withdrawal will enable One97 Communications Ltd (OCL), the parent company, to conserve INR 950 crore, which had been earmarked for investment in PGIL. This move follows One97’s announcement in May 2022, where it committed to investing up to INR 950 crore in PGIL to increase its stake to 74%.
Focus on Insurance Distribution
With this change, Paytm is redirecting its efforts toward distributing insurance products through PIBL. The subsidiary has intensified its focus on providing insurance solutions to Paytm customers, small merchants, and SMEs. PIBL will offer a range of small-ticket insurance solutions across various general insurance categories, including health, life, motor, shops, and gadgets.
Strengthening Partnerships
To bolster its insurance distribution, PIBL has strengthened its partnerships with prominent insurance companies. These partnerships include names such as Digit, Acko, ICICI Lombard, New India, Bajaj Allianz, TATA AIG, Aditya Birla Health, and Universal Sompo, among others.
A Paytm spokesperson commented, “PIBPL brings affordable, easy-to-understand insurance products to our consumers and merchants, making their everyday lives easier. By focusing on small-ticket general insurance offerings and leveraging the strength of Paytm’s distribution, we are committed to increasing general insurance penetration to a wider audience.”
Recent Financial Performance
This development comes just days after Paytm reported its quarterly financial results. The company’s net loss widened by over 225% year-on-year (YoY) to INR 550.5 crore in Q4 FY24, compared to INR 167.5 crore in the same period the previous year. Revenue from operations also dropped by 2.9% YoY to INR 2,267.1 crore, down from INR 2,334 crore last year.
Despite these setbacks, Paytm’s payments business revenue grew by 7% YoY to INR 1,568 crore in the fourth quarter. However, financial services revenue saw a significant drop of 36% YoY to INR 304 crore.
Challenges in Merchant and Loan Segments
On the merchant front, Paytm faced challenges as its active point of sale (POS) device base dropped by 10 lakh, despite a slight increase in the overall merchant base. In terms of loan disbursements, the company distributed loans worth INR 1,671 crore, which is 28% lower than the previous year.
Impact of Regulatory Restrictions
It is important to note that these results come in the wake of the Reserve Bank of India’s decision to bar Paytm Payments Bank from onboarding new users and offering various services, including UPI payments and deposits. This regulatory action has significantly impacted Paytm’s operational and financial performance.
