Ali Hasan
Introduction – If you haven’t heard about Paytm by now, I guess that you might be living under a rock. Everyone knows about this startup who promised to make India’s economy cashless during demonetization and transform it where people would actually believe in digital transactions.
But, has it lived up to the promise? We will answer it but first we will talk about their beginnings. Paytm was started in august 2010 by Vijay Shekhar Sharma with an initial investment of $2 million. It started off as a prepaid mobile & DTH recharge platform but later added new services like data card, postpaid mobile, landline bill payments, Paytm Wallet and E-commerce.
Later it further expanded into new territories and it could also be used for payments dedicated to electricity, gas, water, house tax, metro, Fastag, education, loans, donations, investing in stocks, booking tickets for movies, events, amusement parks as well as for flight and rail bookings.
Its parent organization is One97 communications Ltd. It’s available on various platforms such as android, iOS and windows.
Struggles & Early Days – Vijay Shekhar Sharma had humble beginnings as he came from a middle class background. He finished school when he was 13 and started college when he was 15. In 1997, while he was still in college, he started the website indiasite.net, and sold it two years later for $1 million.
He believes that coming from a small town doesn’t matter at all if you have the drive to make it happen. He also believes that one should convert their weaknesses into their strengths and must be sincerely committed towards their goal for long term, else they will fail.
During his early days, he didn’t have sufficient money and sometimes had to walk long distances all by himself in order to save money for the next day. Many times he was unable to even afford 2 meals per day. He struggled with the English language as he pursued his schooling in Hindi and for him understanding English was a nightmare turned reality.
In 2005, he had raised an amount of Rs 8 lakhs through his venture of which he was conned off 40%. This would also become the darkest time in his life, when he was left bankrupt by his partners, with whom he had just begun a business and raised the first round of funding.
He was completely devastated but he didn’t give up and continued his journey to a successful company, which is today known by the name of Paytm.
Marketing Strategy – They launched a marketing campaign just after Demonetization was announced in India on 8 November, 2016. The campaign tagline was “Paytm Karo” which encouraged fellow Indians to use Paytm services for financial transactions as there was a severe shortage of currency notes to pay for any goods or services. During this time, Paytm gained a lot of market share as it became a viable option to pay for anything we consume or use.
In 2015, Paytm became the title sponsor of the Indian cricket team at a price of Rs 203 crores for 4 years. In 2019, it retained their position as the title sponsor till 2023 for the amount of Rs 326.8 crores.
User Base & Valuation – Their user base stands tall at 350 million users who have used their payment services at least once either through wallet or UPI. As per the company, over 7 million merchants in India use their QR code to accept payments directly into their bank accounts.
In 2017, Paytm became India’s first payment app to cross 100 million app downloads. In January 2018, Paytm was valued at $10 billion but its valuation shot up to $16 billion after it secured a fresh $1 billion in funding led by T Rowe Price in November 2019.
Funding & Share Holdings – Paytm has received a total of Rs 220 crores ($29.5 million) in funding over 4 rounds from a total of 17 investors out of whom 12 are lead investors. The shareholdings of the company are as follows after the recent funding rounds.
| Shareholders | Shareholdings |
| Vijay Shekhar Sharma | 14.67% |
| Ant Financials | 29.71% |
| SoftBank Vision Fund | 19.63% |
| SAIF Partners | 18.56% |
| AGH | 7.18% |
| Berkshire Hathway | 2.76% |
| Others | 7.49% |
In August 2018, Berkshire Hathaway invested $356 million for 3% stake in Paytm, but they confirmed that Warren Buffett wasn’t involved in the transaction.
Revenues & Losses – Paytm reported that their revenue for fiscal year 2019-20 ended March 31, increased to Rs 3,629 crores as it was supported by an increase in number of transactions across various segments. Although Paytm is still not profitable but it has said that its losses have narrowed by 40% on a year-on-year basis.
Paytm Mall reported that their losses have narrowed by 60% to Rs 479 crores in 2019-20 on account of reduction in assortment size, cashback offers and promotions. In Fiscal Year 2019, Paytm had recorded a loss of Rs 4,217 crores ($570 million).
Controversies – Paytm app was taken down from the Google play store in September 2020 for violating its policies. Google said it doesn’t allow unregulated gambling. But it was back on the play store after few hours.
Acquisitions – So far Paytm has made 11 acquisitions which are as follows:-
- Balance
- NightStay
- Cube26
- TicketNew
- Nearbuy
- Little
- in
- Shopsity
- EduKart
- Shifu
Future Goals – Vijay Shekhar Sharma has said that Paytm is planning to be profitable in the next 2 years. Meanwhile, it has also increased hiring activities at a time when companies are laying off staff amid the coronavirus pandemic.
It is now planning to hire over 1,000 engineers, data scientists, financial analysts, and other employees for various tech and non-tech roles. It’s also aggressively cutting costs in order to reduce monthly spending to Rs 40 crores only. It’s targeting an earnings before insurance, taxes, depreciation and amortization (EBITDA) breakeven by Fiscal Year 2022.
It said it’s now not sending confirmation text messages to users on recharges and bill payments as it was costing them a few lakh rupees per month. It’s also renegotiating on its office rentals to help it cut down on its fixed costs.
It will let go of 500-700 employees in the next few months after a performance review. It has said that it plans to allocate a higher amount of employee stock ownership plan (ESOPs) shares to its staff than a cash component, which can help it conserve cash.
It has said that since some of its verticals are seeing no operations, the company is utilizing their staff for other businesses like financial services and insurance brokerage. Due to the Covid-19 pandemic, it has also started selling coronavirus insurance in partnership with Reliance General Insurance.
The Big Question – But the some questions still lies with us that are as follows:-
- Has Paytm really made India a cashless economy?
- Are digital transactions on the rise?
- Do people now trust more in digital transactions?
Well the truth is quite opposite.
Even after 4 years after Demonetization and all-out efforts to make most transactions through electronic, cash is still the king and the preferred mode of payment in India when it comes to paying for anything.
Vijay Shankar Sharma Himself said that “While cashless economy is not possible in India, less cash economy will be in the future. Less cash is the only solution, not the elimination of cash“.
He believes that it would still take 5-10 more years for India to make the transition to digital payments from the traditional mode of cash.
