paytm got net loss in 2024 Q4 Result

  Analysis of Paytm's Financial Performance and ESOP Impact

Paytm Got Loss in Q4 results

Financial Performance Overview

• Net Loss FY24 : Paytm recorded a net loss of Rs 1,423 crore in FY24.

• ESOP Costs FY24 : The employee stock option (ESOP) expense was Rs 1,466 crore for the same year.

If no ESOP expenses were incurred, Paytm would have effectively posted a net profit, given the net loss is slightly less than the ESOP expense.

 Year-on-Year Comparison

FY23 :

•   ESOP Expenses : Rs 1,456 crore.

•   Net Loss : Rs 1,777 crore.

FY24 :

•   ESOP Expenses : Rs 1,466 crore.

•   Net Loss : Rs 1,423 crore.

While the ESOP costs grew slightly from FY23 to FY24, the net loss reduced significantly, indicating an improvement in the company’s overall financial performance despite the ESOP-related expenses.

ESOP Expense Projections

Paytm has projected its ESOP costs over the next few years assuming all granted ESOPs are vested and no new ESOPs are granted:

• FY25 : Rs 1,174 crore.

• FY26 : Rs 558 crore.

• FY27 : Rs 225 crore.

These projections suggest a decreasing trend in ESOP-related expenses, which could positively impact the profitability outlook in the coming years.

ESOP Expenses on Key Personnel

In FY24, 78% (Rs 1,138 crore) of the total share-based payment expenses were attributed to directors, key managerial personnel, and their relatives. This includes:

• Vijay Shekhar Sharma, Founder and CEO.

• Madhur Deora, CFO.

Paytm’s Regulatory Challenges and Market Performance

• Regulatory Issues: Paytm Payments Bank (PPBL) faced stringent restrictions from the Reserve Bank of India, impacting its business operations.

• Market Performance: Since its IPO, Paytm’s stock has significantly declined:

•   IPO Price: Rs 2,150 per share.

•   Current Price: Rs 369 per share, leading to an 83% drop.

•   Market Capitalisation: Reduced from Rs 1.39 lakh crore to Rs 11,491 crore.

 Governance and Leadership Considerations

Vijay Shekhar Sharma, while not classified officially as a promoter, possesses rights akin to one, enhancing his influence within the company. 

This includes:

Permanent Board Seat: Potential entrenchment similar to traditional promoter families in other companies.

Institutional Investor Advisory Services (IiAS) has raised concerns that Paytm may be circumventing regulations to benefit Sharma with ESOPs.

Conclusion

ESOP expenses have a significant impact on Paytm's financials, substantially influencing its net loss figures. However, projections indicate a decrease in ESOP costs over the coming years, suggesting potential for improved financial performance. The company’s market performance and regulatory challenges present further obstacles that need to be navigated. Governance and high compensation levels for key management personnel, including Sharma, remain contentious points reflecting deeper structural and strategic issues within the firm.