Paytm

Won't You Step Into My (Use-case) Parlour

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Once a mobile VAS company in the crowded and dysfunctional telecom services space, Paytm* today has landed into an envious position at the intersection of digital payments, e-commerce and banking. It is also the strategic beachhead for Chinese e-commerce giant Alibaba for its India ambitions.

Paytm

One 97 Communications Ltd

Name as per MCA records

Vijay Shekhar Sharma

CEO

Delhi NCR

Headquarters

Investors

Saif Partners

Alibaba

Sap Ventures

SVB India

Competitors

Freecharge

Mobikwik

What has Paytm been up to, the last year?

After multiple, mostly middling experiments to beat larger players like Flipkart and Amazon in the horizontal e-commerce space, 2015-16 was when Paytm found its true metier at scale – wallet and payments. It claims to have crossed its 12-month target of 100 million registered users in just 9 months, as it (rightly) focused the bulk of its cash burn to acquire new customers and to subsidize or incentivize wallet transactions. Its wallet gives it a relatively defensible moat – scale, habit and non-trivial network effects kicking in with each new merchant, customer or use-case added.

Results

Rs 944 crore: Paytm’s annual revenue, up 180% from the year before.

Rs 2448 crore: Its expenses for the same period, up 263%

Rs 1534 crore: The losses it incurred running its business through the year, up 313%

Rs 1546 crore: The amount Paytm spent on “Advertising Promotional Expenses” – the sack of bricks tied to the feet of every major e-commerce company in India that drag them deeper and deeper into the ocean of losses. Of course every company thinks that this is only making them stronger in the process.

10.5X: the jump in Paytm’s “Secondary Packing Expenses” over the year before. This covers all of its logistics costs – packaging, warehouses, shipping, collection etc.

Rs 3982 crore: the money it received from Alibaba during the year

~Rs 7000: the private, secondary market valuation of each Paytm share held by employees and investors with a face value of Rs 10. This was reportedly around Rs 5000-5200 on November 8th, just before PM Modi announced demonetization. And around Rs 180-200 in 2013.

11.28%: how much founder and CEO Vijay Shekhar Sharma’s shareholding in the company fell during the year. To be more specific, from 32.61% to 21.33%

With PM Narendra Modi announcing “cashless society” as one of the goals of his massively ambitious demonetization initiative, Paytm is in a dream scenario right now, even if a segment of its users are feeling resentful of its aggressive market capture moves. Till now Paytm could only earn money when money exited its wallet, for instance 2% for an Uber ride; 6% for a flight booking; 7.5% for a PVR movie ticket booking; or 10% for a bus ticket booking. RBI rules prevented it from earning anything on the money that sits within the e-wallets of its customers. But with its Payments Bank slated to open soon, it will be able to divert this “float” to itself.

It won’t be a cakewalk though. The next year will see Paytm take on two formidable new rivals though – Airtel and Reliance. Both of these new competitors have, like Paytm, licenses for running their own payments bank and wallet. Additionally they also have a pan-India telecom network, tens of millions of customers and enviable reach within the echelons of government, regulators and big industry.

Paytm’s CEO and founder Vijay Shekhar Sharma is one of the investors in The Ken

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