As a clutch of Indian startups including Zomato, Freshworks, Lenskart and Delhivery, gear up to go public, the Softbank and Alibaba-backed Paytm Group surprised the ecosystem when media reported of its plans for a potential public listing by November.
The fintech major’s IPO would be one of the most awaited and likely to set the course for many startups who are contemplating debuts on stock exchanges in the next two years though it hasn’t officially confirmed the development.
For now, the NOIDA headquartered company has presented its FY21 audited financial results for stakeholders and which Entrackr has managed to source. For background, One97 Communications is the holding entity of Paytm and 41 of its subsidiaries, associates and joint ventures.
The total income of the group has dropped by nearly 10% from Rs 3,540.8 crore in FY20 to Rs 3,186.8 crore in FY21 as transaction volumes dropped due to reduced commercial activity caused by lockdowns imposed during the period.
Out of the total 41 entities, 12 companies controlled by the Paytm group have posted profits for the fiscal ended in March 2021 including On97 Communications Singapore, Paytm Labs Inc, One97 Communications Malaysia & One97 Communications FZ-LLC (Dubai), among others.
Paytm Payments Bank (PPB) is one of the only associate companies of Paytm group which posted profits in India. PPB’s revenues declined by 5.8% to Rs 1,987.5 crore in FY21 from Rs 2,110.6 crore in FY20 and the bank’s total comprehensive income for the year actually grew by 617.5% to Rs 18.8 crore in FY21 from only Rs 2.62 crore in FY20. It’s worth noting that One 97 communication owns 49% of the PBB whereas the remaining 51% is held by Vijay Shekhar Sharma.
The consolidated operating revenue of the group has dropped by 14.6% from Rs 3,280.84 crore in FY20 to Rs 2,802.41 crore in FY21. Importantly, the revenues of FY20 included Rs 255.6 crore which was booked as “Recovery of Marketing expense”. These are the expenses that were previously booked but not actually spent hence written back in this fiscal.
Actual revenues from external customers dropped by 7.4% from Rs 3,025.6 crore in FY20 to Rs 2,802.41 crore in FY21. During the same period, Paytm’s non operating collections from financial assets soared by 154.3% to Rs 3,74.88 crore in FY21 from Rs 147.41 crore in FY20.
Moving over to the expenses side of the income statement, we see expenditure on payment processing remains the single largest cost centre for the company, accounting for a little over 40% of the annual expenses.
These costs actually came down by 15.4% from Rs 2,266 crore in FY20 to Rs 1,917 crore in FY21 primarily due to the reduction in the volume of transactions on Paytm’s payment platform as commercial activity suffered the brunt of COVID induced lockdowns.
Payments related to employee benefits remained somewhat stable, growing by 5.86% to Rs 1,185 crore in FY21 from Rs 1,119.3 crore in FY20. These expenses accounted for nearly 25% of the annual expenses during the last fiscal.
While the overcall collections suffered amidst the COVID-19 pandemic, the management has managed to curb expenses across most cost centres during the last fiscal.
We see a drastic reduction in marketing and promotional expenses which dropped by nearly 62% from Rs 1,397 crore in FY20 to Rs 532.5 crore in FY21. On similar lines expenses related to contest ticketing and subcontract expenses dropped by 44.2% and 69% respectively.
The company spent Rs 350 crore on software, cloud and data centres during FY21 while connectivity and content payments grew by 16.6% during the same period.
Paytm group’s consolidated total expenses during FY21 dropped by 22.08% from Rs 6,138.2 crore in FY20 to Rs 4,782.95 crore in FY21.
It spent Rs 1.7 to earn a single rupee of operating revenue in FY21 as compared to Rs 1.61 spent in FY20.
Even with the reduction in collections, the company has managed to curb its losses by a significant 42% from Rs 2,932.4 crore in FY20 to Rs 1,710 crore in FY21. However, there’s a long way to go as the consolidated balance sheet sports outstanding losses of Rs 12,871.42 crore as on March 31, 2021
Paytm has seen a drop in transaction volume as evidenced by the significant drop in transaction processing charges during FY21. The Sharma-led company has managed to control non-essential expenditure, for instance: the 62% drop in marketing spends which snowballed into the 42% reduction in annual losses.
During the same period, Paytm pumped in Rs 345 crore in its subsidiaries and associates including Paytm Money and Paytm First Games and others as the company looked to diversify its revenue streams.
One97 Communications also liquidated a huge chunk of its financial assets which dropped by nearly 95% from Rs 3,417 crore at the end of FY20 to only Rs 181.3 crore at the end of FY21. The company had cash reserves of Rs 2,330 crore as on March 31, 2021.
While Paytm has controlled losses significantly and it’s a good sign for the IPO-bound firm, stagnation in revenue for two consecutive fiscals – FY19 & FY20 – with a 14.6% reduction in operating revenue in FY21 is a huge concern.
Its revenue in FY19 and FY20 recorded a marginal growth of 5.8% and 1.5% respectively.
According to media reports, Paytm is eyeing to raise $3 billion from its public listing. Indeed it’s an ambitious goal as only a handful of companies in India including Coal India, ONGC, SBI Cards and Reliance have been able to raise over $1 billion from the public market at the time of their listing.
Analysts believe that raising such a huge sum won’t be a cakewalk and Zomato’s performance on the stock exchange, which is set to raise $1 billion, would also set the tone for Paytm’s potential listing.
Update: We have updated the story to reflect that the financials of Paytm is audited.