Paytm Group, which operates 30 subsidiaries along with seven associate and joint ventures including Paytm Payments Bank, insurance broking business, Paytm Money and Paytm entertainment among others, did not witness a significant uptick in its operating revenue during FY20 even as the company managed to shrink losses by more than 30%.
According to Paytm’s consolidated annual returns filed with the Ministry of Corporate Affairs, revenue from operations has remained fairly stable with a marginal increase of 1.5%. Its operating revenue grew from Rs 3,232 crore in FY19 to Rs 3,281 crore during FY20.
Another Rs 348 crore were earned via financial instruments.
One97 Communication which operates Paytm’s payments business accounted for 95% of the revenues collecting Rs 3,115.10 crore during the fiscal year ended in March 2020. The rest were collected by subsidiaries, associates and joint ventures.
Little Internet, which was acquired by Paytm back in 2017 was the subsidiary with the biggest share in consolidated losses, posting a loss of Rs 277.05 crore with a turnover of only Rs 4.53 crore during FY20.
While there was no significant growth in revenues, Paytm has slashed its annual expenses by 19.5% to a little over Rs 6226.3 crore in FY20 from Rs 7,730.14 crore spent in total during FY19. Paytm spent Rs 1.9 to earn a single rupee of operating revenue during FY20, an improvement of 21% as compared to Rs 2.4 spent to earn the same in FY19.
The majority of these austerity measures were implemented on the aggregate customer acquisition costs spent by the company which dropped by 55.21% to Rs 1,571.3 crore in FY20 from Rs 3,507.88 crore spent in FY19.
These expenses made up 25.23% of the total expenditure and included advertising promotional expenses which dropped by 57% to Rs 1,483 crore in FY20 from Rs 3,451 crore in FY19.
Employee benefit expenses accounted for 18% of the total expenditure and grew by 30.73% to Rs 1,119.3 crore in FY20 from Rs 856.2 crore in FY19. Such costs also included ESOP payments of Rs 166.06 crore.
Payment gateway expenditure was the single largest cost factor for the company accounting for 36.3% of the total expenses. These costs remained somewhat stable at Rs 2,259.7 crore in FY20
Subcontractor Expenses also dropped by 18.5% to Rs 221.8 crore in FY20 from Rs 272.16 crore paid out during FY19 while Connectivity and Content Fees paid by the company grew by 27% to Rs 403.3 crore in FY20.
Paytm has managed to curb back its costs during the last fiscal, scaling back non-essential payments as a net cash outflow from operations has improved by 47% to Rs 2385.3 crore in FY20 from the outflows of Rs 4,495.6 crore in FY19.
As a result, operating margins have improved significantly for the Noida-based company. EBITDA margins stood at -65.43% during FY20 as opposed to -112.69% Paytm managed in FY19.
Annual losses have also dropped 30.33% from Rs 4217.2 crore in FY19 to Rs 2,385.3 crore in FY20 as we see the fintech unicorn move towards improved fundamentals in coming fiscals.
The financial performance of Paytm has certainly improved on the back of a significant cut in its losses. While the revenue growth in FY20 has been sluggish, its collections are likely to improve in the ongoing fiscal due to its strong wallet business and domination in UPI’s peer to merchant (P2M) transactions.
Paytm, which has shifted its focus to its ecosystem of combined wallet and payments bank, recorded 281.18 million transactions worth Rs 33,909.50 crore in January via UPI. The Noida-based company recently claimed that it recorded 1.2 billion transactions in February across its financial services such as wallet, UPI, cards and net-banking.
The shift of momentum towards Paytm could also be noticed from users switching to Paytm because of frequent transaction failures and other glitches occurring with Google Pay. Paytm dominated daily active users or DAUs on iOS-enabled devices. According to App Annie, Paytm is the preferred choice for most top-end payment consumers in India with 2.6 million DAUs in February. PhonePe and Google Pay had 7OOK and 500K active users on Apple smartphones.
PhonePe had continued to lead DAUs numbers on Android in February, App Annie data shows. Its active user base on Android devices stood at 59 million whereas Google Pay had an active daily user base of 51 million. Paytm was the distant third player with 31 million DAUs in February.