Paytm Sinks 6 Per Cent Over Vijay Shekhar Sharma's Reappointment As CEO, Regulatory Fears

Paytm told investors on Thursday that the latest guidelines by the RBI on increased scrutiny over digital lending apps could operationally impact its buy-now-pay-later business

Digital payments firm Paytm’s shares dropped 6.2 per cent on Friday, hit by a proxy firm’s opposition to reappointment of its chief executive officer (CEO) and the RBI’s guidelines for digital lending apps, Reuters said.

According to the report, Institutional Investor Advisory Services has said it opposes the reappointment of Vijay Shekhar Sharma as CEO and managing director at the annual general meeting (AGM) next week.

At 2 pm, Paytm has recouped some of its losses and was trading at Rs 792.65 apeice, down 3.98 per cent on the BSE on Friday.

IIAS in a report on August 9 said, “Vijay Shekhar Sharma has made several commitments in the past to make the company profitable, however these have not played out. We believe the board must consider professionalizing the management.”

IIAS also raised concerns that Sharma's overall remuneration, estimated to be Rs 796 crore for FY23, was higher than that of CEOs of all the S&P BSE Sensex companies, most of which were profitable. Adding to that, Paytm told investors on Thursday that the latest guidelines by the RBI on increased scrutiny over digital lending apps could operationally impact its buy-now-pay-later business.

"In the interim, we believe Paytm's lending business disbursement growth may be affected," Macquarie analysts wrote in a note.

Separately, Paytm said macro-economic challenges may lead to "slight moderation" in its growth. The company posted nearly 300 per cent jump in loan disbursals in July.

One97 Communications, which operates Paytm, has reported its Q1FY23 results, where it saw a massive jump in revenue from operations driven by strong monetisation in payments, device subscriptions, and accelerated adoption of high-margin businesses such as lending.

In addition to 89 per cent Y-o-Y revenue growth to Rs 1,680 crore, the company also saw Ebitda (before ESOP) reduce to Rs 275 crore, an improvement of Rs 93 crore Q-o-Q. As a result, the company's contribution profit grew 197 per cent Y-o-Y to Rs 726 crore, leading to an increase in contribution margin to 43 per cent of revenues in comparison to 35 per cent in Q4FY22.

Paytm's payments services revenue grew by 69 per cent Y-o-Y (3 per cent Q-o-Q), supported by rapid growth in user engagement, merchant base, use cases on the Paytm super app and subscription revenue from payment devices.