In it’s quarterly operating performance update for March 2022 quarter, Paytm founder Vijay Shekha Sharma (VSS) has informed the following –
- Paytm should be Operating EBITDA (before ESOP cost) break-even in the next 6 quarters i.e., by September 30, 2023. During December 2021 quarter, Paytm had reported EBITDA (before ESOP cost) loss of Rs 393 crore. Total operating losses during the quarter were Rs 790 crore and net losses were Rs 780 crore.
- His own stock grants will be vested to him only when Paytm’s market cap has crossed the IPO level on a sustained basis. Currently Paytm’s mcap is down by 70% from the IPO levels.
My take
Paytm stock price continues to see significant correction. The company and especially VSS is under significant pressure to send positive signals.
Above two are an effort in that direction.
1st commitment of turning operating EBIDTA breakeven, and that too before ESOP cost is still 18 months away and hence doesn’t mean much. Better would have been to guide towards the actual “action plan” to make various businesses profitable than to communicate an accounting gimmicky number.
As Charlie Munger said – “I think that, every time you see the word EBITDA, you should substitute the words “bullshit earnings”
…. and now we have a new term Operating EBITDA before ESOP cost.
wrt to the 2nd information about VSS’ stock options vesting – I am now more concerned about his focus… whether it would be on business or stock price. In long term, both converge. However, in short term there can be significant divergence between the two.
Paytm has reported Operating EBITDA (before ESOP cost) profits in December 2022 quarter itself – 3 qtrs before the targeted date. The break-up is provided in the attached chart.
This has positively surprised investors and the share price has zoomed since the announcement.
Key points to note –
Overall, as always the commentary was very positive from the management. The difference why people listened this time – because it delivered on the promise of turning Operating EBITDA positive (before ESOP cost).
Personally, I would not jump based on 1 qtr performance and would instead would wait for the sustenance of the business growth and profitability.
Otherwise also, as mentioned in the post, this particular measure is of not much meaning to me.