Mumbai: One97 Communications Ltd, the parent of mobile payments company Paytm, may see its losses more than double in the year starting 1 April, according to its estimates.
Paytm expects its loss to surge to around ₹2,100 crore for the year ending 31 March 2020 from an estimated ₹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 ₹207.61 crore in fiscal year 2021, the report predicted. Eventually, One97 Communications may report a profit of around ₹8,512.69 crore by fiscal 2026. An One97 spokesman declined to comment on the story. 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 recently hired Raghu Chakravarthi from online grocery retailer BigBasket to help with its online-to-offline (O2O) business strategy.
The company, which depends on raising capital by selling shares to grow its business, has projected a negative net free cash flow of ₹1,400 crore in FY20 from ₹582.12 crore in the current fiscal year, given its cash-guzzling online payments business.
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 ₹1,787.55 crore on a total revenue of ₹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 ₹1,604.34 crore from around ₹899.64 crore in the previous year.
Mounting losses and negative cash inflows have made it crucial for One97 Communications to enhance its working capital limit. On 14 February, Mint first reported that Paytm has pledged all its current assets and mutual fund investments to be able to borrow ₹1,400 crore from private lender ICICI Bank Ltd.
Until now, Paytm could borrow a total working capital of only up to ₹400 crore from the bank. On 18 January, Paytm and ICICI Bank entered into an agreement under which One97 Communications’ entire current assets, which stood at ₹7,085.1 crore as on 31 March 2018, was hypothecated by the bank.