Despite all the claims, new announcements and revised strategy to tap the market more effectively, Paytm’s loss has been mounting at an alarming rate. A recent report submitted to the shareholders of One97 Communications Ltd, the parent company of Paytm, highlights the company’s financial performance In FY’19.
Over the last decade Paytm has been expanding on an exponential rate. Paytm’s parent company One97 Communications Ltd. has emphasized the company’s growth to compete with its rivals in the eCommerce and digital payment sector. Recently Paytm expanded its business to the education sector and is rapidly approaching the health sector too.
Backed by Berkshire Hathaway and SoftBank, Paytm expressed its ambition to post its first profitable financial report by Financial Year 2021. But the current report portrays a different scenario.
For the past two years Paytm has seen extensive surges in its losses. From 78% surge in FY18 to Rs 1,604.34 crore to a loss of Rs 4,217.20 crore in FY’19. This translates to a 162.9% YoY surge as compared to the previous fiscal year. While the losses of Paytm has been increasing at an alarming rate, Paytm’s revenue performance makes the scenario little more worrisome. The company has recorded an 8.2% YoY increase in revenue to Rs 3,579.67 crore in FY19.
To put simply, for every one rupee earned in revenue, the company spend Rs 1.30, on an average. This resulted in a loss of Rs. 11.4 crore every day in FY’19.
Moreover, according to the company’s annual report, expenses and debts have risen significantly too. The $15 billion company reports that its expenses rose by 37% from Rs 4,864 crore last year to Rs 7,730 in FY’19, while debts increased 34.7% from Rs 241.6 crore in FY18 to Rs 695.4 crore in FY19.
But the management of One97 is optimistic about future performance. Despite intensifying competition Paytm is expecting to turn the table in the next 2 years. The company has given a projection of reducing its losses by half to Rs 2,100 crore in FY’20.
The management of the company, however, expects to make a comeback to report its first profit of Rs 207.61 crore in FY21. One97 may go on to report a profit of around Rs 8,512.69 crore by FY26.
It is obvious that Paytm’s growing losses are a foreseen effect of its parent company’s aggressive expansion plans to tackle other E comm giants like Amazon and Wallmart. While still the market leader in digital payments, Paytm is facing losses in the retail business. It can only be expected that the Vijay Shekhar Sharma led company has plans to push its ambitions to the top of the hill.
Paytm founder Vijay Shekhar Sharma has recently stated that the company is gearing up to launch its IPO. Mr. Sharma has revealed that preparation for the IPO will be commenced in the second half of 2021 – the year company is aiming to become profitable.