Paytm records four-fold loss for FY16 due to discount and cashback scheme

Paytm has registered four times increase in losses for the FY 16. According to documents filed with the Registrar of Companies (RoC), the net losses of Paytm has surged four-fold to Rs. 1549 crore for the year ended March 31, 2016. In 2015, the company reported a loss of Rs. 372 crore. However, in March 2014, the digital payment provider has registered a profit of over Rs. 5 crore.

The main reason for the huge slump in the profit is heavy discounts in addition to cash back. As per Paytm sources, the concept of cashback have hit the company is a large scale over the last two years.

Paytm founder sold 1% stake to establish Payments bank

Recently, Paytm founder Vijay Shekhar Sharma sold 1% of his holding and raised Rs. 325 crore. In total, he has over 21 % stake in the company. This step was required to fund his dream Payments bank. The Reserve Bank of India has already given approval in principle for the establishment of the bank. Going forward, all the pending balance from the wallet will be transferred to the Payments bank.

Paytm did aggressive marketing in 2016

In 2014-15, Paytm has posted revenue of Rs 336 crore, which is comparatively higher than Rs. 210 crore in FY 2013-14. In a statement released to the press, the spokesperson disclosed that the technology sector requires heavy investments with a deeper vision for long-run profitability. He added that in 2016 the company invested aggressively in marketing, business expansion, and manpower segments.

After Prime Minister announced the demonetization of Rs. 500 and Rs. 1000 currencies, Paytm enhanced the budget in a bid to push for a cashless economy. The company has been regularly publishing front-page advertisements in all leading newspapers to create awareness among the masses about the need for digital wallets.

When asked about when the company expects to break even, the Paytm spokesperson revealed that they hope to achieve profitability by the financial year 2019.

Interestingly, Sharma’s yearly salary was about Rs 3.1 crore in the 2015-16 fiscal. It is very high when compared to Rs. 2.3 crore in the FY 2014-15. We wonder how he can grab a massive salary when his own company is under loss.

That being said, the Alibaba-owned company has not yet clearly revealed the main reason for the huge loss. The company also didn’t project the approximate revenue for fiscal ended March 2016.

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