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[What The Financials] Streamlining Ops Help Paytm Mall Narrow Down Losses In FY19

[What The Financials] Streamlining Ops Help Paytm Mall Narrow Down Losses In FY19

Founded in 2017, Paytm Mall is the ecommerce arm of digital payments giant Paytm

Paytm Mall had decided to curtail its operations to focus on O2O local commerce

Paytm Mall revenues improved by 24.7% in FY19 with cut down in losses

The story of the Indian ecommerce industry has mostly been about unending cash burn and burgeoning losses. This has been an industry-wide accepted standard since India started shopping online, especially with leading players busy in increasing market share instead of revenues.

However, even as players such as Amazon and Flipkart have survived and led the market due to their unending pool of funds, smaller players such as Shopclues, Snapdeal, Paytm Mall, etc have had a bit of tough luck. For instance, in the last two years, Paytm Mall saw huge growth and then an imminent decline.

Founded in 2017, Paytm Mall is the ecommerce arm of digital payments giant Paytm. The company has been losing market share, slipping from 5.6% of the market in 2017 to a mere 3% in 2018 and a further decline this year. The company has raised over $795 Mn from investors such as eBay, SoftBank, Alibaba, etc.

In the middle of this crisis, Paytm Mall worked hard on getting its leadership and operations right. In FY 2018-19, the company saw a rejig of top-level management followed by over 80% cut down in cashback across its online marketplace categories such as grocery, electronics and fashion.

Paytm Mall had decided to narrow its focus to a wholesale platform with O2O local commerce becoming its core focus, instead of a consumer-facing ecommerce site. The company expects to generate a bulk of its sales from O2O, 15% from wholesale and 35% from warehouse items.

How well these attempts worked out has now come to light. According to the company’s ministerial filings, it reported consolidated revenue of INR 968.25 Cr with expenses of INR 2138.77 Cr leading to a loss of INR 1170.97 Cr.

The complete transition has been an improvement on a Y-o-Y basis, as the revenues improved by 24.7% against FY18, expenses decreased by 17.16% and the losses also narrowed down by 34.4%.

On a standalone basis, Paytm Mall reported revenues of INR 868.16 Cr, a Y-o-Y increase of 24.9% with a 17.11% decrease in expenses reaching INR 2139.60 Cr. The company’s losses also decreased by 34.4% to INR 1171.62 Cr.

Inc42 reached out to Paytm Mall to get a response on the financial performance in FY19. However, the company did not respond to our queries till the time of publishing.

Understanding Paytm Mall’s Revenue Sources

Earlier this year, Paytm Mall claimed success in its O2O model transition, attributing this to its focus on becoming a lean and operationally profitable organisation. It also reduced the cost overheads at the same time. The company’s focus is on fashion, home, consumer electronics and mobiles.

In terms of financials, the company’s operational revenue for FY19 was INR 892.77 Cr, which consisted of revenue from contracts with customers as well as marketing and payment gateway fees, marketing promotion fees, shipping and logistics fees, etc.

How Did Paytm Mall Control Its Expenses?

The FY18 losses had alerted the board of Paytm Mall and major investor Alibaba, who realised that Paytm’s volumes, driven largely by cashbacks, would not be a sustainable business. Paytm’s pure-play ecommerce business required massive investments in warehousing and logistics for scale, and cashbacks in such a scenario were proving to be a drag.

Hence, the company decided to narrow its focus to a wholesale platform with O2O local commerce becoming the core business, instead of a consumer-facing ecommerce site.

We examined the company filings to note that in FY19, the company majorly cut down on its advertising expenses. In FY19, Paytm Mall spent INR 317.14 Cr on advertising, 66.4% decrease from INR 944.18 Cr in FY18.

Some of the other expenses for Paytm Mall were employee benefits, information technology expenses, legal professional charges, etc.

Over the last year, the focus of Indian startups has shifted towards finding improved revenue models and achieving profitability in the near future. With eBay investing in Paytm Mall, both companies are eyeing a fresh start. Now the question remains whether Paytm Mall’s dream of becoming the first profitable ecommerce model will come true in the next year, after a positive FY19.


Bhumika Khatri

Inc42 Staff

Hailing from a business-oriented family, Bhumika has always been crunching numbers in her head. Words are her escape and she looks to find hidden startup stories. Reach her on [email protected]
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