Paytm achieves operational profit through payment business

Paytm became ebitda-positive at the end of 2015 and payments business recorded profits on an operational basis.
Paytm's profit run

According to Paytm’s founder and CEO Vijay Shekhar Sharma, Paytm became ebitda-positive at the end of 2015 and payments business recorded profits on an operational basis.
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 ended 2015 with an annual gross merchandise value (GMV) of $3 billion, with more than 60% gain from payments vertical, even as its commerce business continues to lose money just like other e-commerce giants. For information, GMV is the value of goods sold on a platform. Paytm's payments business allows transactions like mobile recharges across various utilities.
Mr Vijay Shekhar Sharma said that the company has done business of over $2 billion from payments and turned ebitda positive in a span of four years. Company’s investments will be channelized towards the marketplace business. Basically this means if Paytm decides to stop allocating discounts in its commerce business, where it's registering losses, it can emerge 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.
Sharma also said that mobile recharge business and other utility payments contributed equal share of $2 billion GMV, achieved 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 as compared to horizontal e-commerce companies, where transaction rates are higher.
Snapdeal-owned Freecharge that claims to be facilitating $1 billion in GMV is continuing its competition with Alibaba-backed Paytm. Freecharge has about 15 million users at present and facilitates 30 million transactions per month as 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 incepted Paytm as a digital payments platform, is now eyeing a bigger play in the commerce business, where biggies like Flipkart, Amazon and Snapdeal have established a strong presence. Mr Sharma said that Paytm should be able to achieve $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 the company.
Because of diversification into multiple businesses, such as marketplace, grocery, O2O (online-to-offline), Paytm's payment platform has witnessed a boost in transaction rates and volumes, a key metric for the payments business to turn profitable on an operational basis.

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