May not achieve or maintain profitability in the future: Paytm

Digital financial services player Paytm, which is set to launch its initial public offering in coming months, has said that it may not be able to achieve and maintain profitability. The company has been loss-making for the last three years and the Covid pandemic led lockdowns has further impacted its business.

“We expect to continue to incur net losses for the foreseeable future and we may not achieve or maintain profitability in the future,” Paytm said in its draft red herring prospectus (DRHP).

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It reported net losses of ₹1,701 crore in the fiscal year 2020-21 down from ₹2,942.4 crore in 2019-20.

“We expect our operating expenses to increase as we hire additional personnel, expand our operations and infrastructure, both domestically and internationally, continue to enhance our platforms and develop and expand its capabilities, expand our products and services, and expand and improve our interface,” it said, adding that some of its subsidiaries and associates have incurred losses for the past few fiscal years and may need financial support.

Worrying numbers

Its net worth fell by 19.4 per cent to ₹6,534.8 crore last fiscal from ₹8,105.2 crore in 2019-20. Similarly, total income declined by 10 per cent to ₹3,186.8 crore last fiscal from ₹3,540.7 crore in the previous fiscal. Marketing expenses nearly halved to ₹532.5 crore in 2020-21 from ₹1,397.1 crore in 2019-20.

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Total borrowings more than doubled to ₹544.9 crore in 2020-21 as against ₹208.7 crore in the previous fiscal. The company also reported negative cash flow from operations at ₹2,082.5 crore last fiscal. Paytm reported that its total merchant base has increased to 2.11 crore by March 31, 2021 from 1.12 crore as on March 31, 2019. It has 33.3 crore total users. The gross merchant value (GMV) nearly doubled to ₹4,03,300 crore by 2020-21 from ₹2,29,200 crore in 2018-19.

Impact of lockdowns

Paytm said the pandemic induced lockdowns has impacted its commerce and cloud business in particular. Revenue from commerce and cloud services decreased by 38 per cent to ₹693.2 crore in 2020-21 from ₹1,118.8 crore in 2019-20.

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“Our commerce GMV declined in 2020-21 primarily due to disruptions to our partners in travel, entertainment and e-commerce industries,” it said in the DRHP. “The pandemic has adversely impacted, and is likely to continue to adversely impact, our operations and the operations of our merchants and business partners,” it further said.

Revenue from payment and financial services amounted to 75.3 per cent of revenue from operations last fiscal as against 58.1 per cent in 2019-20.

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