Loss due to conservative accounting: Paytm

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Loss due to conservative accounting: Paytm
© Provided by The Times of India

Mumbai: Paytm founder & CEO Vijay Shekhar Sharma has said that One97 Communications’s (Paytm’s parent’s) losses were due to conservative accounting, which led to upfront booking of acquisition costs even as revenues from those subscriptions would flow over the next 12 months.

One97 Communications announced its results for second quarter of the current fiscal, the first result after listing, on Saturday. The company’s revenue from operations grew 64%, while consolidated net loss widened by 8% to Rs 473 crore. A key driver of the revenue growth was the 52% growth in non-UPI volumes.

In an interview with TOI, Sharma said “Our accounting is extremely conservative. We immediately charge 100% of all marketing, cashback, sales and system costs. The reason why ebitda (earnings before interest, taxes, depreciation, and amortisation) has improved is that merchants acquired earlier are generating revenue.”

Paytm, which has a payments bank, had earlier expressed intent to seek a small finance bank (SFB) licence that will enable it to lend. However, the RBI on Friday said that it would consider applications for transition to SFB only after five years of a payment bank’s operations.

“We are less than one year away from completing five years (on May 2022) and are open to exploring the opportunities should they arise. Also, Paytm Payments Bank’s net worth is Rs 400 crore as against the Rs 300 crore prescribed by the regulation,” said Sharma.

Responding to analysts who said that Paytm’s business was hit because of increasing market share of UPI in digital payments, Sharma said, “I have always maintained that it is important to have zero fees on UPI as it helps to create a digital acceptance ecosystem. Paytm makes revenue because once a retail merchant matures, they start accepting other digital payment instruments as well.” He said that as a percentage of gross merchandise value, payment processing costs have come down.

“Everything on the app beyond making the payment is revenue-generating. In fact using the wallet for payments in organised retail, or payments using Fastag generates revenue. UPI is like bread and milk in a kirana shop, it may not bring in revenues but does expand the ecosystem,” said Sharma.

According to Sharma, it is clear that third-party apps work harder than bank apps on customer experience in payments. He said compared to other third-party apps, Paytm had the added advantage of holding the customer’s money in the form of payments bank, wallet and credit lines he added. He said with many states easing lockdown, there was an upside to revenue from travel, movie and event ticketing, which were hit by lockdowns during the pandemic.

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