Paytm Mall targets EBITDA breakeven in 2 years, cash burn down to 1/5th

Paytm Mall, the e-commerce entity of Paytm, has seen its fair share of ups and downs, in the past couple years. When the e-commerce marketplace business wasn’t doing well, the company changed the game plan and restructured focus of the entity on O2O business strategy.

Now, Vijay Shekhar Sharma, the CEO of parent Paytm, has revealed that Paytm Mall has cut down its monthly cash burn in FY19 to one fifth. The figure that was a maximum of Rs 200 crore in FY18, has slumped down to Rs 40 crore in FY19.

This essentially means, that where the company was spending Rs 200 crore on monthly basis on its day to day operations in FY18, in FY19 the spending pattern changed and the costs came down to Rs 40 crore per month.

The obvious factors behind this development are the measures taken by the company  in FY19 to stabilize and restructure the Paytm Mall business. The mega cashbacks and e-commerce operations had been leaving huge holes in Paytm Mall’s pockets.

So the company toned down the discounts and cashbacks by almost 80%.  But when that happened, the sales also slumped down severely, leaving Paytm no option but to restructure. Hence, nationwide present shipping business of Paytm Mall was also shut down due to the high costs. Instead, 70-80% shipping happening from the same city.

All in all, FY19 saw Paytm Mall restructuring its selling strategies, as well as the business itself when it went from being a B2C player to O2O. The strategy here matches with that of Chinese firm TMall, an Alibaba Group entity. Alibaba, who is a major investor in Paytm Mall and Paytm.

Now that the company has made headway with its cash burn, the plan as revealed by Sharma to ET, is to focus on increasing revenues by letting sellers advertise and market their products and brand name on the platform. This isn’t the cliche GMV focussed growth plan. That is just a part of it.

Where the firm had a GMV of Rs 13,000 crore in FY19, the plan is to take this figure to Rs 17,000 crore this fiscal year. However, Paytm Mall claims that the nature of this GMV growth is more important because the increase is targeted along with a reduction in cash burn.

All these are contributing levers of a mega plan where Paytm Mall aims at achieving a break even in EBITDA within 2 years. With $160-200 million eBay investment talks going on, the company claims that it will invest in growth for another year, and focus on turning EBITDA in the next. 

Considering the eBay investment is valuing the firm lower than $2 billion due to the ongoing problems at the Paytm Mall house - failed B2C business, fraudulent activities going on, COO Amit Sinha leaving; these targets look like a fair but difficult game.