Paytm CEO Sets Timeline to Become Profitable Again – Will He Deliver This Time?

It is worth noting that Paytm has made several such estimates over the last few years.

Paytm founder Shekhar Sharma.

(Photo Courtesy: Twitter/@uttaminator)

In an undated letter to shareholders, Paytm's founder and CEO Vijay Shekhar Sharma said that he expects the fintech unicorn to become operationally profitable in the next six quarters, by September 2023.

Sharma wrote that the company would achieve this target without compromising its growth plans.

“Rest assured, the entire Paytm team is committed to building a large, profitable company and creating long-term shareholder value," he added.

After commanding India's largest initial public offering (IPO) in November, the share price of One 97 Communications Ltd, Paytm's parent company, tanked on debut and continued sinking as investors lost confidence.

It is now down by around 70 percent.

A Pattern of Tall Claims

But this is not the first time that Paytm has floated an estimate like this. In 2015, Sharma told The Economic Times that Paytm would break even in two years.

Next year, after demonetisation hit and people were shifting away from cash, the estimated profitability date was pushed to 2019, according to a self-commissioned report accessed by the publication.

When 2019 came, another commissioned report – reviewed by Mint – predicted that the company could report its first profit of Rs 207.61 crore in fiscal year 2021, even as losses widened.

The report, prepared by investment bank Corporate Professionals Capital, reportedly made the bold estimation that One97 Communications may even report a profit of around Rs 8,512.69 crore by financial year 2026.

In February 2020, in an interview with Business Insider, Sharma again said that the company would become profitable in two years. He also asserted that there would be no IPO until Paytm reaches profitability.

"Paytm follows a 3-3-3 philosophy. Three years for product market fit, then three years for monetisation pitch, then three years for profitability," he told the publication.

None of these predictions have panned out for Paytm, which remains a loss making company even after 10 years of operations.

However, this time, Sharma has bolstered his claim with the declaration that his stock grants will be vested to him only after Paytm's market cap has crossed the IPO level "on a sustained basis."

For the third quarter of financial year 2021-22, it reported a consolidated net loss of Rs 778 crore, up significantly from Rs 482 crore in the September quarter.

Revenue from operations, however, jumped 89 percent to Rs 1,456 crore.

70 Million Monthly Transacting Users

The letter to shareholders was accompanied by a graphic showing the operating metrics for the fourth quarter ending March 2022.

It showed that monthly transacting users had jumped 41 percent to 70.9 million, compared to the previous Q4, and 900,000 new point-of-sale terminals were deployed during the quarter.

Paytm also said that it disbursed over 6.5 million loans worth Rs 3,553 crores through its platform this quarter, a jump of 374 percent, compared to the same time last year.

The total merchant payment volume processed grew on a quarterly basis to Rs 2.59 lakh crore during this quarter – a growth of 104 percent, year on year.

Operating metrics for Q4 2022.

(Photo Courtesy: Twitter/Vijay Shekhar Sharma)

In March, BSE had sought a clarification from Paytm on the sustained fall in its stock price to which Paytm reportedly replied saying it had made "all necessary disclosures to the stock exchanges within stipulated timeline.”

The Reserve Bank of India (RBI), meanwhile, directed Paytm Payments Bank Ltd to stop onboarding new customers with immediate effect, due to certain “material supervisory concerns."

Reports emerged that this was because of alleged data leaks to Chinese firms which reportedly own about 27 percent of Paytm. The company has denied this.

PPBL was considering applying to the RBI for a small finance bank (SFB) licence by June 2022 – a much needed upgrade from its payments bank status – according to Moneycontrol, but recent developments could hurt Paytm’s chances of upgrading.

(With inputs from The Economic Times, Mint and Moneycontrol)