Business plan

Paytm chief sticks to business plan, sees profitability sooner despite IPO debacle

India’s largest digital payments service provider Paytm is not concerned about its disappointing IPO performance last month and is sticking to its business plan which has escalated due to of the “necessary capital” the company has acquired, its chief executive said.

Paytm will stay the course as the capital acquired will allow it to venture into other financial services, starting with banking and credit, said Vijay Shekhar Sharma.

The company, headquartered on the outskirts of New Delhi, is backed by Japanese group SoftBank and Chinese firm Ant Capital.

“The best part about the IPO is that we hosted [a larger] number of people as shareholders. We are seeing a huge uptake in the credit business, which is making money in the bottom line, ”said Mr. Sharma, who is also the founder of Paytm. The National in an interview on the sidelines of the TiE Global Summit at the Dubai Exhibition Center at Expo 2020 on Wednesday.

Paytm’s $ 2.5 billion IPO in November, India’s largest, was touted by some as a signal that the South Asian country’s attractiveness as a destination for capital global growth, especially for technology investors looking for alternatives to China.

However, the IPO failed as the company lost more than a quarter of its value when it debuted on the Bombay Stock Exchange. The 27.4% drop by One97 Communications, the operator of Paytm, surprised even critics and left retail investors and major fund managers, including BlackRock and the Pension Plan Investment Board of Canada, face heavy losses.

Paytm shares fell 7.8% on Wednesday after a post-listing lockout expired on sales of shares awarded to lead investors. These investors can now sell shares because the blocking rules in India prevent them from doing so for a month after the award.

Yet Mr. Sharma insists that Paytm’s path to profitability will be accelerated. It is aggressively entering the credit space, teaming up with partner organizations in India to provide micro-loans that amount to millions per month.

“Credit is taking off. We are seeing a huge uptake in the credit business that is making money in the bottom line, ”he added.

“It’s also revenue and profit, which means that many of our businesses will contribute to the [overall] and will help us achieve breakeven and profitability in much less time than expected.

India’s financial sector is predominantly a banking industry, with commercial banks accounting for over 64% of the total assets held by the financial system, according to data from the Indian Brand Equity Foundation. The government and the central bank have taken various measures to help MSMEs access finance more easily.

Financial inclusion will also depend heavily on technology adoption, Sharma said. The smartphone penetration rate in India – a country of 1.38 billion people – was 54% in 2020, lagging behind major economies, and is expected to reach 96% by 2040, Statista reported.

Asia and other emerging economies are prime examples of areas where mobile payments have taken off due to the growing acceptance of cashless payments using smartphones, Sharma said. It is also more flexible because, compared to traditional credit and debit cards, mobile payments can be integrated with more technology.

“The global digital payments industry will be led and dominated by mobile, and it is clear that this dominance means the future of payments is mobile,” added Mr. Sharma.

“The higher the mobile penetration rate, the more opportunities there will be for financial inclusion. Smartphones are the most powerful tool and the solution to it.

The best part about the IPO is that we hosted [a larger] number of people as shareholders. We are seeing huge uptake in the credit business, making money in the bottom line

Vijay Shekhar Sharma, Founder and CEO of Paytm

The number of Internet users in India is expected to increase 45% to 900 million by 2025, from 622 million last year, reported the Internet and Mobile Association of India and the Kantar Group.

Paytm is also monitoring developments in the cryptocurrency and blockchain spaces. The company will take action based on what regulators say, Sharma said.

Media reported on Wednesday that a major Indian Parliament bill to regulate cryptocurrencies would be delayed by several weeks.

“Cryptocurrencies and blockchain are obligations that new businesses must embrace. Rather, it is about the complex trust issues that we can solve by putting these technologies in place. Whether or not we see it as a business model will depend on regulatory guidance, ”he said.

Paytm, which was founded in 2010, recorded a loss of 4.74 billion rupees ($ 62 million) in the three months ending at the end of September, compared to 4.36 billion rupees the previous year.

Update: December 16, 2021, 6:59 am