Paytm (One97 Communications) net accumulated losses stands at Rs.129 billion | Paytm annual report review

One97 Communications founded in 2002, is the parent company of Paytm. This company provides all sorts of online services like bill payments, top ups, data processing, games, hotel bookings etc.

The losses in FY21 have narrowed to Rs.17 billion compared to the loss of Rs.29.42 billion recorded in FY20, despite revenue from operations decreasing by 15% YoY. Financial services and payment segment revenue saw an 11% YoY growth. Keeping in mind that digital payments increased significantly due to the pandemic, this growth of 11% seems to be much less than what was expected. The commerce and cloud services segment witnessed a drastic loss in revenue of 38% YoY to Rs.6.93 billion in FY21. Other income head in the P&L increased by 48% YoY

Surprisingly, the marketing and promotional expenses decreased by 62% YoY to Rs.5.33 billion. It used to be 69% of the revenue but in FY21 it was just 17% of the revenue. This can either be due to the fact that the return on interest from marketing campaigns and ads is not very significant because of a very competitive market or the management just wanted to cut costs irrespective. This decision can be perceived by people in a negative light.

There was a 16% hike in salaries, incentives and bonus to Rs.10.3 billion which led to a 6% YoY increase in Employment Benefits Expense whereas the share based payments expense decreased by 34% YoY. The expenses increased from 32% of the revenue in FY20 to 37% of the revenue in FY21.

Retained earnings for the financial year 2021 was at a negative Rs.128.72 billion. Payment processing charges forms 91% of the payment and financial services revenue in FY21, showing a decline from the 119% in FY20. There is no information regarding this in the notes to accounts section of the annual report.

Investments have decreased by 95% YoY from Rs.34.2 billion to Rs.1.81 billion and this may be a method of raising capital and increasing liquidity. The total assets of the company decreased from Rs.103 billion in FY20 to Rs.91.51 billion in FY21. Financial assets form 70% of the total assets in FY21.