Foodtech major Zomato wrote down INR 39 crore investment in its fintech subsidiary Zomato Payment Private Limited (ZPPL) during the March quarter.

Further, the filings showed that the fintech arm surrendered its recently secured online payment aggregator (PA) and prepaid payment instrument (PPI) licenses to the Reserve Bank of India (RBI), citing that the firm does not see a business in the payments space as commercially viable.

"The company has performed the impairment assessment under Ind AS 36 and recognised an impairment loss of INR 39 crore in the profit and loss account (as exceptional item) on its investment in ZPPL," the filings read.

Zomato said that the payment landscape in the country has evolved over the few years since the time they applied for these licenses, and it doesn't see the payments business as commercially viable at this point.

"We do not see ourselves having a significant competitive advantage against the incumbents in the payments space and hence we don’t foresee a business in the payments space as commercially viable for us, at this stage. While we were conscious of these developments as they unfolded, the real impact was more apparent as we got closer to putting in place the structure to commence the operations," the company said in an exchange filing on May 13.

The licences allowed Zomato to process online payments by itself and offer wallet, cash cards, etc. services to its customers, giving it more in-house control over digital payments alongside third-party apps. The idea was to reduce costs associated with third-party payment services, both gateways and payment apps and save on merchant charges.

Zomato said the other operations of ZPPL will continue and the development will have no material impact on the revenue or operations of the firm.

The online food and grocery delivery major incorporated ZPPL in August 2021 with an authorised share capital of INR 20 crore. Last year, the company rolled out its own unified payments interface (UPI) offering, called Zomato UPI, in partnership with ICICI Bank.

Established in August 2021, ZPPL was created to provide digital payment services, including wallets and payment gateway services. The platform also features Zomato Pay, allowing users to make payments directly through the Zomato app at selected restaurants.

The withdrawal from this business comes at a time when the RBI has suggested strict KYC norms for PAs. While most of the players who secured the final operating licence from the RBI are existing PAs, Zomato was one of the few new entrants into this space. It would have had to compete with the likes of Razorpay and Cashfree for this business.

On Monday, May 13, Zomato filed its financial report for the last quarter of FY24 or Q4 FY24. The firm reported INR 175 crore profit after tax with a revenue of INR 3562 crore. Overall, the company registered a 71% surge in its revenue to INR 12,114 crore in FY24 from INR 7,079 in FY23.

Article Source - PTI