Paytm’s losses surge due to aggressive expansion and competition

Chennai: Rivalry with e-commerce majors Amazon, Flipkart may double the losses of One97 Communications Ltd, the parent of mobile payments company Paytm in the financial year starting 1 April, according to its estimates.

Paytm expects its loss to surge to around Rs 2,100 crore for the year ending 31 March 2020 from an estimated Rs 870 crore in the current fiscal, according to a confidential report prepared by investment bank Corporate Professionals Capital Pvt. Ltd for Paytm. Mint has reviewed a copy of the report.

The company may, however, report its first profit of Rs 207.61 crore in fiscal year 2021, the report predicted. Eventually, One97 Communications may report a profit of around Rs 8,512.69 crore by fiscal 2026. Paytm’s growing losses were attributed to the parent’s emphasis on aggressive expansion to take on bigger rivals in the e-commerce space such as Amazon and Walmart-Flipkart.

‘The company is now planning to significantly scale down its cash-burning online businesses or selling stakes in them and augment its offline business ventures,’ said a person familiar with Paytm’s ongoing plans.

Paytm last raised funds from billionaire investor Warren Buffet’s Berkshire Hathaway Inc., which bought an undisclosed stake in One97 in August for $ 356 million. In less than a decade, One97 has launched 25 subsidiaries and five associate firms, including Paytm Payments Bank Ltd, LogiNext Solutions Pvt. Ltd, SoCoMo Technologies Pvt. Ltd and QorQL Pvt. Ltd. In the year ended 31 March, eight of its subsidiaries had recorded significant losses.

Over the past few years, Paytm group has been losing more money in its online retail business than its digital payments service, where it is the market leader. Paytm’s online retail business Paytm Mall, under Paytm E-Commerce Pvt. Ltd, reported a loss of Rs 1,787.55 crore on total revenue of Rs 774.86 crore during FY18, according to filings with the Registrar of Companies.

In its bargain to grow faster, One97 Communications’ total losses during the fiscal year 2018 almost doubled to Rs 1,604.34 crore from around Rs 899.64 crore in the previous year.