Case study · Fintech
Paytm (One97): The IPO, the RBI Action on Paytm Payments Bank, and the FY26 Turnaround
A business case study of One 97 Communications Ltd (Paytm): its payments and financial-services model, the ₹18,300 crore IPO, the RBI's 2024 directions against Paytm Payments Bank, and how the FY25 accounts reflected the reset.
Last updated 30 Oct 2026, with FY26 audited results. Figures are taken from RBI press releases, the company's audited results and exchange filings, and the news reports listed under Sources. This is an educational case study, not investment advice.
Why this case matters
Paytm helped make digital payments part of everyday life in India, from wallet payments to QR codes at small shops. Its parent, One 97 Communications Ltd (One97), raised ₹18,300 crore in November 2021 in what was then India's largest IPO. In January 2024 the Reserve Bank of India restricted the business of Paytm Payments Bank Ltd (PPBL), an associate in which One97 holds 49%.
The case is a clear example of regulatory and group-structure risk: a company's own accounts can be hit hard by action against a related entity it doesn't control, because its products depend on that entity.
The business model
One97 earns revenue in three broad ways:
- Payments: fees for processing payments for merchants (online and in-store), including payment devices such as soundboxes and card machines, and consumer payments.
- Financial services distribution: fees for distributing loans, insurance and other products made by regulated lenders and insurers. One97 is not itself the lender.
- Marketing services and others: ticketing, deals and advertising. The movie ticketing and events businesses were sold to Zomato in August 2024.
PPBL was a separately licensed payments bank. Before 2024 it held customer wallets and bank accounts, issued FASTags, and maintained the nodal accounts through which One97 and Paytm Payments Services Ltd settled merchant payments.
The IPO
The IPO was priced at ₹2,150 a share. On listing day, 18 November 2021, the shares opened about 9% below the issue price and closed about 27% lower, according to the Indian Express and The Hindu. The weak debut was widely reported as a turning point in how Indian investors valued loss-making tech companies.
The RBI action
The RBI acted on PPBL in two stages, using its powers under Section 35A of the Banking Regulation Act, 1949:
- 11 March 2022: PPBL was directed to stop onboarding new customers.
- 31 January 2024: citing a comprehensive system audit report and a compliance validation report by external auditors that "revealed persistent non-compliances and continued material supervisory concerns", the RBI directed that no further deposits, credits or top-ups be allowed in customer accounts, wallets, FASTags and NCMC cards after 29 February 2024, other than interest, cashbacks and refunds. Other banking services, including fund transfers and UPI, were to stop. The nodal accounts of One97 and Paytm Payments Services Ltd were to be terminated by 29 February 2024.
- 16 February 2024: the deadline for customer accounts and wallets was extended to 15 March 2024. The nodal-account deadline stayed the same.
Customers could still withdraw or use their existing balances. The RBI published FAQs to explain this.
Effect on One97's accounts
One97's audited results describe how it responded: it terminated its nodal accounts with PPBL, discontinued major business activities with PPBL, simplified the shareholders' agreement and withdrew its nominee director from PPBL's board.
In FY24 the company recorded a ₹227 crore impairment of its investment in PPBL, according to the notes to the results.
| ₹ crore | FY24 | FY25 |
|---|---|---|
| Revenue from operations | 9,978 | 6,900 |
| Loss before exceptional items | (1,385) | (1,468) |
| Exceptional items (net) | (6) | 823 |
| Loss for the year | (1,422) | (663) |
Figures converted from ₹ million in the audited results and rounded.
Revenue fell about 31% in FY25. The smaller loss is mainly explained by exceptional items, as disclosed in note 4 of the results:
- a gain of ₹1,345 crore on selling the movie ticketing and events businesses to Zomato (consideration about ₹2,048 crore, subject to adjustments), and
- an accelerated ESOP charge of ₹492 crore, after the MD & CEO voluntarily gave up 2.1 crore options granted in FY22. Under Ind AS 102 the unvested cost was charged at once, and cumulative cost of about ₹4,092 crore was moved from the ESOP reserve to retained earnings.
Loss before exceptional items was actually slightly wider in FY25 than in FY24. Anyone comparing headline losses without reading the notes would get the wrong picture.
FY26 update
The year ended 31 March 2026 was, in the company's words, its first full year of profit. From the audited consolidated results and the Q4 FY26 earnings release:
| ₹ crore | FY25 | FY26 |
|---|---|---|
| Revenue from operations | 6,900 | 8,437 |
| Total expenses | 9,096 | 8,521 |
| Profit / (loss) before exceptional items and tax | (1,468) | 768 |
| Exceptional items | 823 | (186) |
| Profit / (loss) for the year | (663) | 552 |
| EBITDA (as reported by the company) | (1,506) | 502 |
Revenue grew 22%. Employee costs fell from ₹3,288 crore to ₹2,765 crore and marketing from ₹659 crore to ₹536 crore. Revenue from distributing financial services grew 52% to ₹2,594 crore. The company reported a cash balance of ₹13,315 crore at 31 March 2026.
FY26 still carried net exceptional items of ₹186 crore. Unlike FY25, though, the profit doesn't depend on them: profit before exceptional items and tax was ₹768 crore.
What went wrong
- Dependency on one related entity. Wallets, FASTags, merchant settlements and parts of UPI ran through PPBL, so restrictions on the bank hit One97's products directly.
- Compliance findings were not resolved. The RBI's 2024 action followed the 2022 restriction and, in its words, "persistent non-compliances". The detailed findings were not made public in the press release; this case study does not speculate on them.
- Valuation ahead of profitability. The IPO was priced for growth. When growth slowed, the share price absorbed it.
What went right
- Fast separation. The company moved nodal accounts and merchant settlement to other banks within the RBI's timelines and reduced its ties with PPBL.
- Portfolio clean-up. Selling non-core ticketing businesses raised cash and focused the company on payments and financial-services distribution.
- Transparent notes. The audited results set out the RBI action, the impairment, the business sale and the ESOP charge in detail.
Finance, accounting and audit lessons
- Map your critical third parties. List every bank, processor or partner a product can't run without, and plan for its failure.
- Associates can hurt you without consolidation. Under the equity method you take your share of losses and test the investment for impairment when there are indicators, such as a regulatory action.
- Read exceptional items. One-time gains and charges can turn a deteriorating year into an apparently improving one.
- ESOP accounting has cliff effects. When options are forfeited or cancelled, Ind AS 102 can require the remaining cost to be recognised immediately.
- Regulators read system audits. A comprehensive system audit or compliance validation report is a control review. Weaknesses in KYC, IT and controls reported there are treated as supervisory concerns.
- Internal financial controls are not paperwork. Clear process documentation, risk-control matrices and testing are what let a company show a regulator that problems are fixed.
Key takeaways
- One97 raised ₹18,300 crore at ₹2,150 a share. The stock closed about 27% lower on listing day.
- The RBI restricted PPBL in March 2022 and, more severely, in January 2024, citing persistent non-compliance found by external audits.
- FY25 revenue fell to ₹6,900 crore from ₹9,978 crore. The loss narrowed to ₹663 crore mainly because of a ₹1,345 crore exceptional gain on the ticketing sale.
- FY26 revenue recovered to ₹8,437 crore and the company reported a profit of ₹552 crore, with profit before exceptional items of ₹768 crore.
- Group structure, related-party dependence and compliance controls can matter as much as the business model.
Frequently asked questions
Did the RBI act against Paytm (One97) or against Paytm Payments Bank?
The directions under Section 35A of the Banking Regulation Act, 1949 were issued to Paytm Payments Bank Ltd (PPBL), a separate bank in which One97 holds 49% as an associate. They affected One97 because its nodal accounts and many products ran through PPBL.
Why did One97's FY25 loss fall while revenue fell?
FY25 included an exceptional gain of ₹1,345 crore from selling the movie ticketing and events businesses to Zomato, partly offset by a one-time ₹492 crore ESOP charge, as per the company's audited results.
What did the RBI cite?
Its press release of 31 January 2024 referred to a comprehensive system audit report and a compliance validation report by external auditors that revealed persistent non-compliances and continued material supervisory concerns.
Was FY26 Paytm's first profitable year?
The company's FY26 earnings release describes FY26 as its first full year of profit: EBITDA of ₹502 crore and profit after tax of ₹552 crore, against a ₹663 crore loss in FY25.
Sources
- One97 Communications: audited results for FY ended 31 Mar 2026
- One97 Communications: Q4 FY26 earnings release
- RBI press release, 31 Jan 2024: Action against Paytm Payments Bank under Section 35A
- RBI press release, 16 Feb 2024: revised timelines
- RBI FAQs on business restrictions on Paytm Payments Bank
- One97 Communications: audited results for FY ended 31 Mar 2025
- One97 Communications: FY25 earnings release (NSE filing)
- Paytm Annual Report FY2024-25
- The Indian Express: Paytm crashes on listing day (Nov 2021)
- Reuters: Paytm sinks on debut
General information only, not professional advice. Rules change; check the current law and your facts before acting.