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Payments Biz Has Made Operational Profit- PayTm

Paytm’s payments business has recorded profits on an paytm logooperational basis, founder and CEO Vijay Shekhar Sharma told. Sharma said the Noida-based company became ebitda-positive at the end of 2015, but didn’t give details.

Ebitda (earnings before interest, tax, depreciation and amortization), also called operating income, is a measure of the profitability of a company’s core business. 

Paytm closed 2015 with an annual gross merchandise value, or GMV, of $3 billion, with more than 60% of it coming from the payments vertical even as its commerce business continues to lose money just like other e-commerce players. GMV is the value of goods sold on a platform. Paytm’s payments business facilitates transactions like mobile recharges across various utilities.

“We have done business of over $2 billion from payments and turned ebitda positive in a span of four years. Our investments will be channelized towards the marketplace business,” Sharma told .

Essentially, what this means is that if Paytm decides to stop doling out discounts in its commerce business where it’s registering losses, it can turn profitable at the company level as well. Paytm loses over $20 million a month on its platform, primarily to feed discounts via cashbacks to the consumers.

“The mobile recharge business and other utility payments constitute equal share of the $2 billion GMV we clocked from the payments business last year. A key reason for Paytm’s payment operations turning profitable operationally is the sticky nature of business. The number of repeat users is relatively higher compared to horizontal e-commerce companies, where transaction rates are higher,” Sharma said.

Alibaba-backed Paytm faces competitors like Snapdeal-owned Freecharge, which claims to be facilitating $1 billion in GMV. Freecharge has about 15 million users at present and facilitates 30 million transactions per month compared to Paytm’s 120 million users witnessing 90 million transactions a month. Snapdeal had acquired Freecharge in one of the biggest deals in India’s internet space last year for about $400 million. Naspers-owned PayU, Mobikwik and Citrus Pay are some of the significant players in the payments category in India.

Sharma, who started Paytm as a digital payments platform, is now aiming for a greater play in the commerce business where biggies like Flipkart, Amazon and Snapdeal have established a strong presence. “We should be able to clock $10 billion in GMV this year and commerce business will have a substantial share in that. The core payments and aligned business will have a pie of $5 billion while the commerce platform should clock another $5 billion for us,” he said. Owing to diversification into multiple businesses such as marketplace, grocery, O2O (online-to-offline), Paytm’s payment platform has seen a boost in transaction rates and volumes, a key metric for the payments business to turn profitable on an operational basis.