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Paytm was early in the super app race in India, but the past year has led to Paytm shedding parts of its once-mighty super app empire
A series of missteps, regulatory faultlines and thinning margin in core business slammed the brakes on Paytm’s expansion overdrive
The suspension of Paytm Payments Bank dealt the lethal blow and more or less forced CEO Vijay Shekhar Sharma to shelve the super app dream
Everything everywhere all at once. It’s not just Hollywood sci-fi — in India’s bustling fintech ecosystem, that’s what super apps want to be. And, that’s the pitch that Vijay Shekhar Sharma used before Paytm’s public listing and towards the latter years of its life as a private company.
The idea of super apps — from payments to ecommerce to investments to insurance and more — has travelled from China to India, but so far we have not really seen this approach unlock the revenue value that had been promised.
Relying on UPI payments for customer acquisition, super apps today are still bleeding money on verticals and if Paytm
epitomised the trend at one time, now, with its payment business disrupted in 2024, the fintech giant is shedding parts of its super app empire.
The deal with Zomato for Paytm Insider was a clear sign, which was followed by the stake sale in PayPay in Japan. Sources claim Paytm’s gaming venture First Games is likely to be offloaded next. And with CEO Sharma proclaiming in 2024 that payments will be the biggest focus area going forward, could other verticals also step out of Paytm’s umbrella?
Catching Up With Paytm’s Super App Dream
“Vijay [CEO Sharma] always wanted to play a bigger game – more like India’s answer to WeChat or Alibaba with huge data of consumers at his disposal. The hypothesis could have come from Chinese investors in Paytm who were the biggest internet giants,” a veteran fintech investor, who had invested in Paytm earlier, said.
UPI transactions, which constituted the majority share of digital payments, became a non-monetisable entity after the introduction of the Zero MDR regime in 2020.
It eliminated the merchant discount rate (MDR) charged on transactions using UPI, which is today the largest digital payment mode in India. For Paytm and other UPI apps, the zero MDR is a major revenue leech, especially because of the incessant customer acquisition spending.
The biggest blow to the startup came early last year, when the Reserve Bank of India cracked the regulatory whip on Paytm Payments Bank, setting Paytm back by more than a year in terms of revenue.
This froze the company’s wallet business and disrupted its lending business. Merchant payments also suffered as Paytm had to scramble for new banking partners, and there was an RBI-mandated review by banks and NBFCs on how digital loans were being distributed. This impacted the overall revenue of Paytm in FY25 and towards the end of FY24.
We will dive into the financial comparison with PhonePe, Paytm’s closest payments super app competitor, later in this piece, but first, a look at how much of the Paytm super app promise is even intact compared to what it was just two years ago.
Games: Next In Line?
After the sale of Paytm Insider to Zomato last year and divesting from PayPay, Sharma claimed that the company is on track to report profitability in the next two quarters. When we tested these claims last week, experts and analysts ruled out the possibility of Paytm racing to profitability unless the company succeeds in raising revenue significantly in the next two quarters.
As the fintech startup banks on UPI incentives, it will have to struggle hard to attract more customers while regaining its market share. Another way of shoring up the bottom line is selling off more assets.
This is where the focus is turning to First Games. The gaming venture turned around from a loss of INR 21.6 Cr in FY23 into a profit of INR 10.6 Cr in FY24. But revenue for the year suffered a steep 50% slump to INR 213 Cr.
First Games – a distinct app offering rummy, fantasy sports, ludo and fantasy cricket – saw its monthly downloads falling sharply from 1,50,000 in September 2024 to 1,00,000 in February 2025, according to data sourced from app intelligence platform Similar Web.
Industry insiders and sources within the company point to the gaming venture being potentially sold off especially after the revenue chill in the real money gaming industry.
“We would like to clarify that the information provided by your sources is factually incorrect and misleading. First Games is a profitable company and remains focused on expanding its operations, while also receiving market interest from time to time. Any speculation regarding an acquisition is inaccurate,” Paytm spokesperson said.
Paytm’s Sharma has not touched on the gaming business revenues and other metrics for the past few years in public disclosures and announcements. The vertical has raised $20 Mn over the course of two internal funding rounds, data from Inc42 Datalabs shows.
“Gaming would need an altogether different focus and investment, for which Paytm might not be in an appropriate position. With the competition in the industry getting intense and international gaming companies foraying into India, focus has also shifted to developing gaming architecture and building gaming studios to attract the userbase which will require a consistent line of investment,” the founder of a gaming studio startup in Bengaluru told Inc42.
If sources are to be believed, First Games may well go down the path of the company’s movies and live entertainment booking business Paytm Insider. Paytm Insider fetched INR 2,048 Cr, but it had an adjusted EBITDA of INR 29 Cr in FY24, around 10% of the revenue for the fiscal year.
The Insider deal also attracted the high multiple because Zomato saw it as an investment for inorganic growth; it’s not clear whether First Games offers such an upside to any potential acquirer. But with the gaming vertical seeing a slowdown, First Games might not necessarily see a massive deal like Insider.
Regardless, it’s clear that selling off an asset has a positive impact on the bottom line and very often the stock price as well. Paytm went on a mini rally after the Insider deal was signed with Zomato, gaining from INR 620 in August to INR 850 in November 2024. The Zomato deal also added cash on the books of Paytm, which helped it turn a profit.
Ecommerce & Insurance: Mixed Fortunes
One reason why Paytm is now shedding parts of the super app is its failure to capitalise on a large user base. Ecommerce is the best example of this, but insurance and investments will fill the gap for Paytm, at least that’s the hope.
Sources within the Paytm parent One97 said that CEO Sharma was bullish on taking another shot at ecommerce early last year, after the early success and subsequent downfall of Paytm Mall, which was built on the promise of 300 Mn users.
But the fintech giant’s focus on core businesses after the RBI whip last year led the management to rethink the ecommerce plans. A beta version of the ecommerce vertical was thrown open for a closed group for testing as early as April 2024, but as of now, there’s no clarity on when this would be launched officially, if at all.
While Paytm said it cannot reconfirm when the ecommerce business will be relaunched, for now, the Paytm app is offering grocery and non-grocery offerings in partnership with retail stores and brands on the Paytm app through ONDC network.
With the ecommerce trajectory unclear, Sharma was always keen on the underpenetrated insurance market in India and took on insurtech players like PB Fintech, InsuranceDekho, Acko and Go Digit.
Paytm gave up on the general insurance licence after listing due to the expensive nature of this business. Instead, it chose to become an insurance aggregator and distributor.
According to Paytm’s management commentary for Q3 FY25 results, under the insurance distribution model, the focus will be primarily on distributing small-ticket life and non-life insurance policies. This is a model which depends on volume and Paytm would be banking on the fact that its user base is still strong enough to unlock the upside in the insurance business, even without the licence.
Paytm’s insurance broking subsidiary posted a net profit of INR 8.3 Cr on revenue of INR 30.6 Cr in FY24, according to the company’s filings with the MCA, but Paytm has not disclosed insurance distribution commission income separately thus far, preferring to club it with other financial services such as lending commission.
The Paytm Money Trump Card
The other more clear silver lining is Paytm Money, the company’s stockbroking arm that offers systematic investment plans (SIPs), mutual funds (MFs) and stock investments, which has kept the startup’s super app dream alive.
An upbeat public market in 2023-24 helped Paytm’s wealthtech business post a 48% on-year surge in revenue to INR 198 Cr, while profit zoomed 68% to INR 71 Cr. Sharma declared during Q3 FY25 results that investment tech will continue to be a major focus.
In Q3 FY25, wealthtech and marketing verticals together contributed INR 267 Cr in revenue to overall INR 1,828 Cr revenue from operations.
Admittedly, this scale is much lower than Groww or Zerodha. The latter reported INR 9,372 Cr in revenue and INR 5,496 Cr in profits in FY24.
Groww’s revenue in FY24 was INR 3,145 Cr, but with just INR 300 Cr in profits, a very narrow margin at least in comparison to Zerodha.
One reason for this profit disparity is that Groww’s marketing costs in particular are pretty high compared to Zerodha. Paytm will likely be in the same boat as Groww, as it also leverages marketing and ads for customer acquisition.
Plus, SEBI tightened the regulations in futures and options (F&O) trading last year, and higher long-term capital gains (LTCG) tax has resulted in a slowdown for investment platforms such as Groww and Zerodha. In sync with the industry trends, Paytm Money saw its monthly downloads fall from 400,000 in September 2024 to below 100,000 in February 2025.
However, Paytm Money recently received approval from the SEBI to act as a research analyst, which brokerage firm Motilal Oswal claimed opens a new opportunity for the company to diversify into wealth management, thus, potentially unlocking a “new stream of fee-based income”.
Vijay Shekhar Sharma’s plan of creating India’s first super app was not new, but it was bold and many predicted that it would take decades for India to replicate the Chinese success story.
But even a decade later, Paytm is not in the right place. Faisal Kawoosa, a technology analyst who founded Techarc, blamed the fragmented nature of the Indian market, unlike in China, where consolidation is fuelled by strict regulations.
“Consumer behaviour in India is massively distinct and what works in one geography may not work well in another. In Paytm’s case, there is definitely a first-mover advantage, and users develop an affinity for an app that first serves a use case. Whosoever comes next has nothing substantial to differentiate that could trigger a switch for consumers,” Kawoosa said.
He cited the example of WhatsApp. Everyone uses it for chat, but rarely for payments.
The Competition Catches Up
Paytm held the first-mover advantage in the super app game, but in terms of the revenue, payments, lending and investments are the primary contributors. The other parts of the super app business, from ecommerce to ticketing to insurance distribution, were extras that fintech apps added over the course of time as their user base grew.
PhonePe was the closest competitor to Paytm in terms of revenue as of FY24. PhonePe reported operating revenue of INR 5,064 Cr in FY24, compared to Paytm’s INR 9,978 Cr. But in the nine months since then (till December 2024) Paytm has fallen behind. The Delhi NCR-based giant’s FY25 annual revenue is on course to match PhonePe’s FY24 numbers.
Paytm’s revenue for Q1, Q2 and Q3 FY25 has been trending 35% lower on a YoY basis compared to these respective quarters in FY24. If this trend continues, Paytm could finish FY25 with around 30%-35% lower revenue than FY24, which would put its annual income in the ballpark of INR 5,300 Cr.
In fact, if PhonePe maintains the revenue growth rate seen in FY23 and FY24 — 77% and 74%, respectively — it could well emerge as the leading fintech app in India by revenue by March 2025.
Expanding into multiple verticals has also often triggered consumer discontent in the Indian markets which, in turn, makes the idea of a super app difficult to take flight.
“If someone is using Paytm for payments and booking railway tickets, as soon as Paytm announces another service, consumers sort of feel offended by the fact that these apps have started to ‘push’ services limiting consumer’s right to choose. It looks like they are forcing you to buy from specific partners,” Kawoosa said.
Paytm is not the only one to encounter this challenge. PhonePe, CRED and others have all gone for the platform approach, even the likes of BharatPe and Groww are heading there, but Paytm was the pioneer in many ways and as it revisits the super app question, will others look to capitalise?
Update | March 24 | 8:45 IST
Story has been updated to include Paytm’s response.
[Edited By Kumar Chatterjee]
