Mobile payments company Paytm is likely to take longer than previously thought to turn around as competition heats up, a report says. The losses of the company's parent One97 Communications are likely to double in the short-term, topping Rs 2,100 crore in fiscal 2020 ending on March 31, 2020, a media report said quoting a consultant.
The losses in the current fiscal, FY19, are estimated at Rs 870 crore, according to the report prepared by the Corporate Professionals Capital. The company may turn around in FY21 notching up a profit of about Rs 200 crore, the report says.
Mint suggests that 97Communications may achieve a profit of over Rs 8,500 crore by the financial year 2025-26. Sources attribute the increasing losses to the company's aggressive expansion strategy as large corporate houses are entering the mobile payment field.
Amazon and Walmart have announced their intent to enter the UPI payment scenario, apart from a clutch of banks and other financial institutions. Google Pay is also threatening to heat up the competition.
A source told Mint that the company may tone down its expansion-oriented strategy to rein in the losses. "The company is now planning to significantly scale down its cash-burning online businesses or selling stakes in them and augment its offline business ventures," the report cites the source as saying. Paytm hopes that its new hire Raghu Chakravarthi from online grocery retailer BigBasket will help its online-to-offline business strategy.
The company's net cash flow is expected to remain negative at Rs 1,400 crore in the next financial year, rising from the current year's Rs 580 crore. Warren Buffet's Berkshire Hathaway Inc bought an undisclosed stake in One97 in August for $356 million helping Paytm remain liquid.
One97 has launched 25 subsidiaries and five associate firms, including Paytm Payments Bank Ltd, LogiNext Solutions, SoCoMo Technologies and QorQL in a space of 12 months. Eight of the company's subsidiaries suffered significant losses during the financial year that ended on March 31, 2018.
The digital payments service has remained the company's mainstay while its online retail business has been bleeding money. Paytm still leads the pack in digital payments, according to estimates.
Paytm Mall, the company's online retail business, suffered Rs 1,787 crore loss against revenue of Rs 775 crore during FY18, according to the company's regulatory filings.
One97 Communications' took in total losses of about Rs 1,600 crore during the FY18, almost against Rs 900 crore in the previous year.
Financial experts say the mounting losses and negative cash inflows have made it crucial for One97 Communications to enhance its working capital limit.
A recent report said Paytm had pledged all its current assets and mutual fund investments to be able to borrow Rs 1,400 crore from private lender ICICI Bank.