No more cash burn at Paytm: CEO Vijay Shekhar Sharma
What's the story
Paytm is done with cash burn in the business, said CEO Vijay Shekhar Sharma. Speaking at Business Standard BFSI Insight Summit event, he added that the company is already making great strides in controlling spending.
Previously, Sharma had said that Paytm will soon become free cash flow positive. Last month, Paytm's board unanimously approved a share buyback worth up to Rs. 850 crore.
Context
Why does this story matter?
Softbank-backed major Paytm hasn't had the best of times since its bumper $2.5 billion IPO. The company's share prices have been on a constant decline.
It is now at Rs. 506.55, over 70% lower than its debut price of Rs. 2,150. However, the company has been making progress every quarter.
The company has also decided to buy back shares, showing confidence in its business,
Cash burn
Paytm is far ahead of ambitions: Sharma
"It has got decided last month that it (cash burn) would no more be continuing," Sharma told a room full of banking executives at the event.
"As far as Paytm is concerned, we have publicly declared that we are far ahead of our ambitions — far meaning the border of magnitude ahead — in terms of re-setting our cash burns," he added.
Quarter
Paytm's consolidated loss widened last quarter
In the September quarter, Paytm reported a consolidated loss of Rs. 571 crore, a 21% year-over-year increase from Rs. 472.90 crore.
During the same period, its expenses rose 60.4% year-over-year to Rs. 2,561.4 crore, while its revenue from operations saw a 76% year-over-year increase to Rs. 1,914 crore.
Paytm had net cash, cash equivalents, and investable balance of Rs. 9,182 crore in September end.
Cash flow
Company's cash burn could end in 4-6 quarters: CLSA
In a letter to shareholders, Sharma said that the company will become free cash flow positive in 12-18 months. According to CLSA, Paytm's cash burn could end in the next four-six quarters.
The company's consolidated losses have narrowed on a quarter-over-quarter basis. Its EBITDA before ESOP has also seen an improvement on a year-over-year and quarter-over-quarter basis, signaling the strength of its business model.
Lending
Paytm plans to scale its lending business
Much of Paytm's hopes of turning its business profitable reside in the lending business. Last month, Sharma told shareholders about the company's plan to scale its lending business.
"Due to the huge demand for lending in our country, our low penetration, and the compounding nature of our lending journey, we are extremely optimistic about the prospects of our lending business," Sharma said.