Paytm Shares Edged Higher as It Prioritizes Insurance Distribution Post-IRDAI Withdrawal

On June 13, Paytm shares experienced a modest rise after One97 Communications, the parent company of the fintech firm, revealed a new focus on offering insurance products from various providers. This strategic shift follows the acceptance of Paytm General Insurance's application to withdraw its registration by the IRDAI, as reported by the company to the stock exchanges on that day. 

In the previous session, Paytm share price ended 5.5% higher, closing at ₹401.50 on the National Stock Exchange. Over the past five sessions, the stock has seen an approximate 16% increase, propelled by adjustments in circuit limits and favorable business updates.

Paytm General Insurance Limited had requested the Insurance Regulatory and Development Authority of India (IRDAI) to withdraw its application for registration as a "General Insurance Company," which would have enabled it to create general insurance products.

"The move aligns with our focus towards doubling down on insurance distribution across Health, Life, Motor, Shop & Gadgets segments, facilitated through our wholly-owned subsidiary Paytm Insurance Broking Private Ltd(PIBL)," Paytm said.

"We have been further informed by PGIL that its request for withdrawal of aforesaid application has been accepted by IRDAI vide letter dated June 12, 2024. As mentioned in our previous communication, the move aligns with our focus towards doubling down on insurance distribution across Health, Life, Motor, Shop & Gadgets segments, facilitated through our wholly-owned subsidiary Paytm Insurance Broking Private Ltd(PIBL)," Paytm said.

Paytm's analogous strategy for its loan business elicited mixed responses from brokerages. Bernstein pointed out that a permanent shift to a distribution-only model for loans would lead to "a much weaker model," effectively making the company a loan distribution agent. Conversely, acting as a loan service provider offers greater value.

Paytm is reportedly undergoing restructuring, with earlier reports indicating plans to terminate several employees. However, Paytm has refuted these claims, asserting that no new layoffs have been enacted. A company spokesperson informed a news agency that Paytm is providing outplacement support to employees who have "resigned". 

Additionally, Moneycontrol reported earlier this week that Paytm CEO and founder Vijay Shekhar Sharma is reaching out to key former employees, such as Renu Satti, Kiran Vasireddy, and Nehul Malhotra, among others, in an effort to strengthen the company's revival plans.

"Talks with Vasireddy and Malhotra, who could be leading the user growth initiative at Paytm, were initiated sometime back. Vijay has been in touch with his close aides and wants to rebuild the whole team as he takes direct charge of each business," sources told.

Paytm announced its intention to innovate small-ticket insurance products for both consumers and merchants. By focusing on small-ticket general insurance offerings in partnership with its collaborators, Paytm aims to utilize its extensive distribution network to increase insurance penetration among a wider audience.