Vijay Shekhar Sharma‘s
Paytm group is now losing more money in its online retail
business, where it is a distant third behind
Flipkart and Amazon, compared with digital payments, where it is the market leader but being challenged by the likes of Flipkart’s Phonepe and Google Pay, recent filings show.
One 97 Communications Ltd, which houses the main payments business, reported an over fourfold increase in consolidated revenue in FY18 to Rs 3,314.8 crore as losses swelled to Rs 1,606.05 crore from Rs 903.09 crore due to increased advertising/marketing and payment gateway expenses, as per documents sourced from data company Tofler.
At the same time, the group’s online retail business Paytm Mall, under Paytm E-Commerce Pvt. Ltd, saw its financials deteriorate further with a loss of Rs 1,787.55 crore on total revenue of Rs 774.86 crore in FY18 as it looks to compete with market leader Walmart-backed Flipkart and Amazon India, which together have over 80% market share.
The combined losses of One 97 and Paytm Mall went up by 270% to Rs 3,393 crore from Rs 917 crore while combined revenues went up by 417% to Rs 4,089 crore.
This means that the flagship company One 97 earned Rs 2.07 for every Re 1 it lost in the financial year ended March 31 this year, an improvement from Rs 1.26 it earned in FY17 and Rs 0.51 in FY16 it earned on every Re 1 in losses. At the same time, Paytm Mall earned revenue of Re 0.43 per on every Re 1 lost in FY18, falling from Re 0.54 earned on every Re 1 lost in FY17.
The improvement in One 97’s financials is driven by several factors, one of them being the restructuring of a few years ago.
In 2016, One 97 hived off its online retail platform into Paytm E-commerce Private Ltd (Paytm Mall) while it became a 49% shareholder in the payments bank business because of regulatory reasons. Paytm E-commerce saw losses jump from Rs 13.63 crore to Rs 1,787.55 crore, which is now not on the books of One 97 Communications.
Paytm E-commerce, which has also raised capital separately from Alibaba, Softbank and SAIF Partners, paid One 97 Communications Rs 405 crore in royalty fees and Rs 307.27 crore in customer access expenses.
But even after excluding revenue earned by One 97 from related party Paytm Mall, the company saw a significant improvement in revenue growth at 233% in FY18 as compared to just 30% between FY16 and FY17.
This comes as One 97, which is backed by China’s Alibaba and Japan’s Softbank, claimed its annualised gross transaction value (GTV) crossed $20 billion (about Rs 1.3 lakh crore) in February 2018, a fourfold increase from March 2017 as it captured a bigger share of consumer spending across areas such as travel and movie ticketing. In July, Paytm had said it crossed $50 billion in GTV.
Surprisingly, One 97’s legacy mobile value-added services (VAS) business in Africa across countries like Tanzania, Nigeria, Uganda and Benin brought in a total profit of over Rs 100 crore in FY18, helping partly offset losses. The company operates over the top (OTT) businesses in those locations.
But One 97’s overall expenses increased significantly during the year. The biggest expenditure was advertising promotion, which went up 127% to Rs 2,193 crore as Paytm hawked its services after demonetisation. Expenses on the payment gateway went up nearly fivefold to Rs 1,199.51 crore.
Money spent on salaries and staff went up by 67% to Rs 540.06 crore. The salary of founder Sharma, who holds around 15-16% stake in One 97 Communications, remained the same at Rs 3 crore.