Two of India’s hottest startups, fintech firm Paytm and food delivery provider Zomato, have reported wider losses in their quarterly earnings.
One 97 Communications Ltd, the parent company of Paytm, reported a higher fourth-quarter loss on Friday due to higher payment processing, marketing and employee costs. However, its shares jumped 8% as CFO Madhur Deora said the company is on track to break even at the EBITDA level by September 2023.
Paytm said its March quarter net loss widened to Rs 761.4 crore from Rs 441.8 crore in the same quarter last year. Losses were marginally lower than Rs 778 crore in the December quarter. Revenue from operations came in at Rs 1,540.9 crore, up 88.99% against Rs 815.3 crore recorded in the same quarter a year ago.
“The business trajectory is admirable but a longish runway still remains for bottom-line profitability,” Yes Bank Securities analysts wrote in a note. Macquarie analysts echoed the same thoughts and said they believe profitability is still an uphill battle and that EBITDA losses may take 12 quarters to break even.
For Zomato, even though revenue grew 75%, the company’s expenses nearly doubled, leading to a loss of Rs 360 crore. CEO Deepinder Goyal said the company will not make any more fresh investments from its $400-million corpus for quick commerce as it is being aggressive about conserving cash.
Zomato on Monday reported net losses of Rs 359.70 crore in the fourth quarter of FY22, a 2.5x jump from Rs 134 crore in the same quarter of FY21. It had reported a net loss of Rs 67.20 crore in the third quarter of FY22.
Goyal wrote in a filing that the company believes its growth trajectory is back on track and that he doesn’t foresee “post-Covid ramifications” affecting the growth rate anymore.
Both Paytm and Zomato debuted on the Indian bourses in 2021, and while Zomato opened at a 53% premium, Paytm fell as much as 28%. Zomato shares have crashed declining 28.5% in the past one month and 61% in six months while Paytm shares have fallen 8.84% in a month.
“In a nutshell, with tight market conditions, companies which cannot showcase free cashflow will find it difficult to hold ground. Especially in case of listed tech companies, it will be a double whammy—1) preserve cash/give up growth for profitability and 2) defend the high valuations. There will be a lot more consolidation in the coming months and business models will evolve till they become profitable,” Anand Rathi Investment Banking Director Atul Thakkar told DealStreetAsia.
Despite mounting losses, Paytm CEO gets 5 more yrs
Paytm has reappointed Vijay Shekhar Sharma as managing director and chief executive for five years, from December 19, 2022, to December 18, 2027.
“Vijay enjoys the confidence of the board and majority of shareholders; as long as that is intact, he will continue to be in office irrespective of P&L. Question is if the founder and CEO cannot turn the company into profit, then who can? Till the time investors don’t have an answer on it, they will support the current management,” Anand Rathi’s Thakkar told DealStreetAsia.