No More Cash Burn, Aiming Control In Spending: Paytm CEO

Paytm CEO Vijay Shekhar Sharma assured that there will be no more cash burn in the business adding that the fintech giant was already re-setting its ambition on controlling spending. Sharma was speaking at a Business Standard BFSI Insight Summit event recently.

“It got decided last month that it [cash burn] would no more be continuing,” Sharma said.

The comment comes shortly after Paytm declared that it would become cash flow positive in the next 12-18 months. In a letter to shareholders, Sharma said that the business is “on the right path to profitability and free cash flows” and is optimistic about its lending business – a comment that the founder has reiterated on separate occasions.

In Q2 FY23, Paytm disbursed 91.92 Lakh loans worth INR 7,313 Cr – a 3.2X year-on-year (YoY) increase. In the period under review, Paytm reported a loss of INR 571 Cr, up by 21% YoY while its revenue from operations soared 76% YoY to INR 1,914 Cr.

Paytm’s expenses grew 60.4% to INR 2,561.4 Cr in Q2 FY23 from INR 1,599.4 Cr in Q2 FY22 and employee benefits accounted for the biggest chunk at INR 944.1 Cr – 1.4X YoY increase.

The fintech major spent INR 564 Cr – 50X higher than FY21 – for ESOP expenses towards directors, key managerial personnel (KMPs) and their relatives and INR 5.22 Cr for salaries, bonuses and incentives. 

In Q2 FY23, marketing and promotional expenses surged 76% YoY to INR 327.5 Cr.

Further, the month of November had been a tumultuous one for the publicly-listed fintech startup. Paytm’s share slid nearly 30% in November 2022 alone and the stock faced immense pressure as the lock-in period for QIBs (qualified institutional buyers) expired. 

Furthermore, RBI stood its ground on barring Paytm Payments Bank from onboarding new customers. The apex bank cited IT outsourcing and operational risk management issues and also refused the aggregator’s licence for the startup.

The current comment by Paytm CEO on reducing cash burn also follows the startup’s plans of buying back equity shares of up to INR 850 Cr from the open market. And since Paytm is still not making any reserve money, questions have been raised about how the startup plans to fund the buyback, since it cannot use the IPO proceeds for the same.

On December 22, 2022, Shares of Paytm opened half a per cent lower than the previous closing and were trading at INR 510.90 at the time of filing this story.