PhonePe spent Rs 2,150 Cr to earn Rs 184 Cr operational revenue in FY19

Digital payments in India is a high burn game and all players have been bleeding profoundly. For instance, Paytm’s payments vertical had posted a loss of Rs 2,615 crore in FY19, whereas Google Pay is also estimated to lose over a thousand crore during the year ended in March 2019. 

While Google Pay managed to post a profit because of its complex organisational structure and rendering of services from multiple entities, the company must have incurred a staggering loss - like Paytm, PhonePe or Amazon Pay. 

On the lines of competitors, the Flipkart-owned payments firm has recorded a 2.4X jump in losses to Rs 1,907 crore in FY19. It had posted a loss of Rs 791 crore in FY18. The company spent heavily on advertising and promotion, which at Rs 1,296 crore made up more than 60% of the total expenditure of the company during FY19. 

For background, Google Pay spent Rs 1,028 crore on rewards and Paytm had splurged Rs 3,508 crore on customer acquisition.

With 5X growth in its income, PhonePe has posted total revenue of Rs 245.8 crore in FY19. It had a revenue of Rs 49.03 crore in FY18. Operational revenues also grew over 4X to Rs 184.22 crore in FY19 from Rs 42.79 crore.

Spending on employee benefits and salaries also rose 4X in FY19, totalling Rs 531.14 crore apart from unexplained miscellaneous expenses worth Rs 196.44 crore.

The multi-fold spike in burn rate has pushed PhonePe’s total expenses to more than Rs 2,150 crore in FY19 from Rs 840.06 crore in the preceding fiscal. This reflected in the cash flow for the company as well. The net operating cash outflow amounted to Rs 1,722.73 crore during the last fiscal, rising 2.42X from Rs 710.02 crore in FY18.

The company fueled these expense mainly from the proceeds of Rs 2,762.46 crore which it received from its Singapore-based holding company during FY19. It also earned around Rs 32 crore by proving digital payment services to Flipkart Internet. 

PhonePe invested heavily in current investments buying as much as Rs 21,805.87 crore worth investment property as the total assets grew four folds to Rs 1,892.45 crore. The current investments at the end of FY19 stood at Rs 1018.35 crore, increasing 12.5X from Rs 475.98 crore in the preceding fiscal. 

The company also sold Investments worth Rs 20,921.28 crore during the fiscal ending in March 2019. The total assets for PhonePe also grew four folds to Rs 1,892.45 crore. 

Heightened competition in digital payments space can be gauged from the fact that Paytm, PhonePe and Amazon Pay collectively recorded a loss of Rs 5,682 crore in FY19. Curiously, Google Pay reported a profit of Rs 5.1 crore in FY19. Although, it’s quite bizarre and unlikely that G-Pay would have made an actual profit when everyone else is losing several million USD.

Read our analysis on G-Pay: The curious case of Google Pay’s profitability in FY19.

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