Paytm 3.0 - Reaching Near Breakeven In Two Years
Forbes India|June 4, 2021
As of 2020, Vijay Shekhar Sharma’s super app for financial services had run up losses in thousands of crores. Now, as digital payments gets yet another boost courtesy Covid-19, he’s hopeful of reaching near breakeven in two years
Harichandan Arakali

Vijay Shekhar Sharma was trying to import a batch of oxygen concentrators from China when he sat down for an interview for this story. At some point, in between, he also left a voice note for his assistant to let everyone know he would participate in the week’s ‘Friday Final’ hangout, on a Zoom conference call, of course; once, these weekly get-togethers would have helped executives and staff to hang out with Sharma to unwind and talk about “what’s happening in life,” he says.

Today, there are staff on Zoom calls wearing masks, because someone in their family has Covid-19, or an urgent piece of work necessitated calling in a technician, Sharma says. “In 2020, Covid was in an apartment complex or a colony, and we knew it was there. In 2021, it has walked into everyone’s homes. I never thought it would be so harsh,” he says. The five-day holiday for Labour Day in China has delayed the fulfillment of the order for oxygen concentrators as well, as Paytm is trying to help staff and others.

“Entrepreneurs who believed that they owned the destiny of their lives, that they could do what they aspired to do, they are all struggling to accept the harsh reality,” he says, speaking from his Delhi home.

And yet, perhaps even more than demonetization, when India banned two high-value currency notes overnight in November 2016, the coronavirus has come as a shot in the arm for not just Paytm, India’s most valued startup and digital payments leader, but for multiple internetled ventures around the world.

Sharma’s venture started out as One97 Communications Ltd in 2010, offering people the option to ‘pay through mobile’, and hence Paytm, and top up their phone plans and pay utility bills, and so on. He then offered a mobile wallet and expanded the number of things that people could pay for, using their phones—from train ticketing to hospitality. Backed by venture capital funding, Sharma is today at the head of a company that has some 14 fully or partly owned subsidiaries, a joint venture, and multiple associate companies. One97 and Paytm’s operations include an eCommerce marketplace, insurance, lending, stockbroking, a payments bank, online gaming, and events, and entertainment.

The e-commerce bet was a big one, but it didn’t pan out the way Sharma had hoped—he wanted to make it the third big e-commerce ecosystem in India, alongside Flipkart and Amazon India—and most of the other forays are yet to mature enough to make money. And when India launched the Unified Payments Interface (UPI), Paytm failed to capitalise on it, and today lags in terms of UPI volume market share, behind Flipkart’s PhonePe unit and Google Pay. Sharma has a different view on this, and more on that later.

Especially over the last two years, the 42-year old billionaire has tried to go back to the basics, to the strengths of the payments business, after pulling the plug on a cashback-led strategy to add customers at Paytm Mall, the online marketplace, and moving that operation to Bengaluru.

Paytm has been trying to make its wallet experience better than ever. For example, its executives say it has the least failures, or declined payments due to technical reasons, then even Paytm UPI, which in turn has the lowest failure rate among all the banks providing UPI services, based on data from the National Payments Corporation of India (NPCI).

On the merchant front, it is incrementally adding more tools and technologies to not only make it easier for them to accept payments but also to send money to their vendors, pay salaries, and so on. And third, Paytm’s financial services businesses— lending, wealth management and stockbroking—are small but growing rapidly, tapping Paytm’s large base of consumers and merchants.

The wallet user base also helped Paytm add 60 million customers to its payments bank. That network effect helped make Paytm Payments Bank a rare entity: It is profitable, while other payments banks either just stopped or are running at a loss.

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Today, says Sharma, “we’ve become far more sure of ourselves”. Five years ago, talking about bringing digital finance to half a billion Indians was an aspirational statement. Now it’s well on its way to becoming reality. Paytm has over 300 million consumers and 20 million merchants using its wallet.

Sharma has pumped over ₹20,000 crores ($2.73 billion) into his venture, with funds from investors including China’s Alibaba Group and its affiliate ANT Group, Japan’s SoftBank Group, and America’s Berkshire Hathaway. The last significant funding round, announced in November 2019, saw Paytm being valued at $16 billion. Overall, it has raised about $3.5 billion in funding.

“In FY21-22, we are expecting to reach breakeven or near-breakeven. Not at the financial-year level, but in one of the months, towards the end of it.” The intention is not to invest less, but to continue to expand the market. “In 2021, we are expecting a business that does not require any more equity capital,” Sharma says.

“For sure,” Paytm will hit breakeven over the next two years, says Madhur Deora, president and group CFO of Paytm. The former investment banker is a bit more conservative than his boss: “Our trajectory suggests that burn will continue to come down and we should aim to hit breakeven perhaps not this year [2021-22] but the next. That should be our aim.”

From time to time there are opportunities like the insurance business that Paytm acquired, which will need money, but “for the organic business that we do we don’t really need more money,” he explains. And “the existing funding, excluding any large acquisitions, should last us till breakeven.”

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