Paytm’s losses increased exponentially in FY18 thanks to advertising, personnel costs

• Paytm experienced consecutive losses, from nearly ₹9 billion for FY 2016-17 to ₹16 billion for the FY 2017-18.
  

• Despite the widening loss, Paytm has counted on investments from Berkshire Hathaway, Alibaba Group and SoftBank Group to keep expanding its operations.
  

• The company’s expenses shot up due to a surge in personnel costs as well as advertising and promotional expenses.
  

• After the debut in Japan with the launch of PayPay, Paytm is all set to expand into European markets.
  

Paytm’s parent, One97 Communications has recorded a loss of ₹16 Billion for the FY18, which is 2.5 times the revenue recorded for the year. The total revenue climbed to ₹3.3 billion, from ₹7.8 billion in FY17. The company has been trying to cut down on losses since the time it carved out its e-commerce arm from the parent company with a transfer of assets accounting to ₹6.2 billion at the time of hive-off.

However, despite the widening loss, Paytm has remarkably retained its list of investors. The company has counted on investments from Berkshire Hathaway after Alibaba Group and SoftBank Group Corporation that are the largest stakeholders for the company with 40% and 20% stake, respectively. Founder, Vijay Shekhar Sharma, holds a share of 16%.

Though the reason for losses are still unanswered, the company’s expenses shot up due to a surge in advertising and promotional expenses covering ₹2.9 billion of the total expense for FY18 as well as ₹5.4 billion towards employee expenses including salary hikes, provident funds and gratuity payments.

The company’s online retail business, Paytm mall, which is the third biggest e-commerce retailer in India, deteriorated with a loss of ₹1,787 crore on the total revenue. Paytm mall has been putting in all efforts to compete with the players Amazon India and Walmart Inc.’s Flipkart. Nearly 60% of its sales are recorded from offline stores. According to a recent report, Paytm mall has 10 million merchants and is expected to double within a year.

The company seems to be looking at a broader aspect of growth since it has launched a mobile-based payment facility ‘PayPay’ in collaboration with SoftBank and Yahoo Japan to get into the global markets. The Paytm founder indicated that they are now going to plan their entry in Europe as their long-term agenda is the expansion of the number of users that roll into electronic transactions.