PayTM has a serious profit problem🤕

IPO-bound Paytm dropped its annual report over the weekend—and honestly, we wish there were any bright spots to be excited about.

Numbers suggest revenues actually declined during the COVID year, and profitability is a distant ask at this point. Meanwhile, emerging categories such as insurance, gaming are barely getting started, far from carrying the load of the empire.

Quick look:

• Revenues dropped 10% YoY to ₹3,186 crores
• Total expenses dropped 22% YoY, which is the only good looking stat
• Total losses of ₹1,700 crores for the year, which is pretty damning tbh, but losses improved almost ₹1,200 crores vs. last year, largely due to a decreased spending on marketing and promotions
• Payments revenues dropped 5% to ₹1,988 crores
• Gaming brought in ₹200 crores, while losing ₹150 crores total

Management attributed the 10% revenue decline to the freeze in merchant processing business, with mainstreet mostly shut for business for at least 3 months of 2020. But then, given COVID’s broad boost to the adoption of digital payments, things should’ve looked better. We sense some serious market share declines.

Then there is the fiscally irresponsible cash burn—especially when you stack up the performance to global payments processors and fintech like PagSeguro, Square, PayPal,  or even closer to home, traditional banking companies in India, who all operated under the same stress of COVID.

Big picture—we ain’t skeptics, but getting the average investor too excited about that IPO at a $40 billion deal tag will be a tall order for PayTM management, especially as competition in payments explodes, while the “super-app” dream is still far from reality. Up the game fellas.