US-based conglomerate, run by billionaire Warren Buffet, Berkshire Hathaway has recently announced that it has acquired a stake in One97 Communications Ltd, the parent company of the Paytm group which runs Paytm Digital wallet and Paytm Payments Bank and Paytm Mall (E-commerce) through subsidiary companies.
The Economic Times reported earlier Monday that Berkshire was in talks to invest between Rs 2,000-2,500 crore and pick up a 3-4 percent stake in One97 Communications. Long affair with losses
Paytm was founded by Vijay Shekhar Sharma in 2010. It was started off as a prepaid mobile and DTH recharge platform and later added data card, postpaid mobile and landline bill payments in 2013 and ventured into digital payments by launching Paytm Wallet in 2014, which became its flagship business since then. Paytm further diversified its business into e-commerce and also received license for starting a payments bank. The company is also soon going to launch its wealth management service through Paytm Money.
The revenue of the company has grown seven times from Rs 119 crore in 2009-10 to Rs 829 crore during 2016-17. Despite meteoric rise in its topline, the company is still into deep losses. During 2016-17, the company posted a net loss of Rs. 899 crore, even higher than its consolidated revenues during the same year.
Though, the company did manage to reduce its net losses for a year during 2016-17 as compared to Rs. 1,496.7 crore in 2015-16, its net loss again swelled to Rs. 1,604 crore in 2017-18, showed RoC filings. The revenue figures for 2017-18 were not available with RoC.
Untill 2013-14, One97 Communications ran with profits. During the year, the company posted a net profit of Rs. 5.66 crore against a total revenue of Rs 210 crore. 2013-14 also coincides with the launch of Paytm Wallet. Though, the digital wallet business helped company’s topline grow at a faster pace, the company also started burning cash due to its advertising and promotion expenses in order to promote and expand the business, which pushed the bottom-line of the company into red.
The advertising and promotion expenses for the company increased from Rs 33.62 crore during 2013-14 (10 percent of company’s revenue) to Rs. 1,347 crore in 2015-16. The advertising spend was more than double the revenue earned during the year.
Though the expenses reduced to Rs 969.5 crore during 2016-17, yet stood as a substantial amount as compared to the total revenue of Rs 829 crore during the same period.
Valuation stands high
Even though the losses are mounting, the valuation of the company has increased. With the current capital infusion from Berkshire, the company is estimated to be valued above $10 billion which makes it the second most valued tech-startup in India after Flipkart. The ecommerce startup was valued at $21 billion when US-retail major Walmart bough 77 percent stake in the company.
The current valuation of the company is Rs 59,467 crore (around $8.8 billion), according to the valuation report dated May 7, 2018, filed by the company on RoC.
The company was valued around $6 billion during March 2017, when the three investors of the company—Reliance Capital, Saama Capital and SAP Ventures sold their stake to the company’s existing investor Alibaba and its payments arm Ant Financial.
Paytm counts Softbank, Alibaba and multi-stage investment firm SAIF Partners as its main investors and has so far raised $ 2.4 billion for these investors.
Paytm is also aggressively acquiring other startups in order to diversify its businesses. Earlier this month, Paytm acquired a Bengaluru-based fintech startup Balance.In June 2018, it had acquired a Delhi-based startup Cube26 Software and in May 2018, it bought Chennai-based online ticketing platform TicketNew.