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Paytm parent’s losses widen two-folds at INR 39 billion, to lay-off 500

Vijay Shekhar, Founder of One97 Communications

One97 Communications India Ltd, the parent company of digital payments startup Paytm has been incurring massive losses every year as it keeps burning cash to acquire more users, expand to overseas market and diversify its business.  The company had last year entered into the financial services segment offering mutual fund investments to its users.

Losses widened

According to its financial data accessed on business intelligence platform Tofler, the company has incurred a two-fold increase in losses of INR 39 billion for the fiscal year ending March 2019. In the year-ago period, the losses for the company, which runs mobile wallet Paytm, payments bank Paytm Payments Bank and eCommerce platform Paytm Mall stood at INR 14.9 billion.

The Softbank and Alibaba-backed Unicorn’s losses have multiplied even as its revenues declined. The Noida-based company, founded by Vijay Shekhar Sharma, reported a marginal rise in its revenues at INR 30 billion in FY 19 as compared with INR 29 billion in the previous fiscal.

Challenges from UPI

The company’s flagship product Paytm, a digital wallet, has been struggling to keep pace in the payments space after the Indian government introduced a free UPI (unified payment interface) payments system in 2017 wherein consumers could transfer amount up to INR 1 lakh through this mode to anyone from their banking app without any charges and instantly.

Besides, entry of global player Google into the payments segment through Google Pay, based on UPI, also gained popularity and Paytm started losing sheen. At present, Google Pay enjoys about 60 per cent of the market share in the UPI transactions, followed by Walmart-owned PhonePe at 21 per cent. Paytm is at 5 per cent, according to data provided by payments gateway RazorPay.

Big fundraise and layoffs

Despite losses, the company has raised around $1.39 billion led by US-based asset manager T Rowe Price Associates and Japan’s SoftBank Group on a condition that the company should aim to go public within the next five years.

The fundraise also came amidst reports of massive layoffs at the company that saw its employee-related expenses increase by 16% to INR 6.2 billion in FY 19, as per its financial filings. According to reports by online news publication Entrackr on November 29, Paytm has offered pink slips to around 500 employees across its various verticals.

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