 "Paytm looks to invest in 10-15 more firms in 2 years: Vijay Shekhar Sharma")
Mobile wallet player Paytm has decided to also focus on investments in the next round of its growth. In an interview, Vijay Shekhar Sharma, Founder & CEO of Paytm, tells Nupur Anand that the wallet player has crossed 100 million users and they carry out over 75 million transactions every month. The company will now target a user base of 500 million wallet users by 2020. Edited excerpts:
In the next leg of growth, will the focus be on acquisition as you have funds of Rs 3,200 crore earmarked for it?
If you look at the payment system, we solve everyday payment problems and what we have seen is that instead of waiting for offline merchants to accept payment, if we can get those merchants to the mobile platform then they start accepting digital payments. So, we believe that we will bring offline merchants onto the mobile platform and they will then use our wallet. And to do that, we cannot build everything, so we will help build the ecosystem where we will have take of 20-40 per cent in such companies.
Yes, that is right. I don’t think we want to run their companies. Instead, we want to propagate Paytm to a greater number of consumers. And to do that, we want to help these entrepreneurs propagate Paytm and in return allow them to leverage our marketing and customer base. So it is not an acquisition, but it is more investment-led.
How many investments have you made so far, and which sectors would it be?
We have made about 15 investments so far and they have been mainly made into logistics companies, commerce platform and transaction-led platforms.
What is the size of these investments?
There are two kinds of investments — one would be under $10 million, and the other kind would be more than $100 million. We are more interested in making the smaller investments more often and a few select cases of larger investments. There is an opportunity to make the larger investments and there are companies that are getting created every day. We don’t think there are clear winners yet, and we don’t want to back one with such big investments until and unless we are clear about it. So typically our investments so far have been under $10 million.
How many more companies are you looking to invest in and by when can we see that?
We are looking at investing in 10 or 15 more companies. If we end up doing the larger investments, then it will be within a time period of two years or so. Currently, we are looking to invest in companies that help our merchants in carrying out their work. We have realised that logistics is an important area and we will definitely focus on it. Currently, there are talks on with companies in this space and paper work going on, but we believe that it should be done by next month.
When do you expect to break even?
We think we will be able to breakeven in another three years, by 2018. Currently, the deficit in the amount of money we spend in a month versus the amount of money we make is about Rs 150 crore.
Are there more investments being lined up by Alibaba?
Currently, Alipay has 25 per cent and our whole funding of Rs 5,000 crore is equity led and that is all.
You are planning to up the consumer base from the current 100 million, to 500 million, which will require more investments. Will Rs 5,000 crore be enough or would you need to raise more?
If we breakeven in three years, then we will expand on our own. So, the Rs 5,000 crore is the money that we need for the next 15-30 months. So, right now, there are no plans for more capital coming in.
We have seen deep discounting in mobile wallet space. How long do you think it will be sustainable?
It is also a business of the last man standing and so people need to build business models that can sustain beyond this. So we are going through the cycle, and we don’t participate is such aggressive discounting. Our understanding is that customers have a lot more fundamental offerings from us and we want to believe that consumers will still use us even when there are no discounts.
What is the growth roadmap for Paytm?
It is going to be a three-step journey for us. First being the focus on pay, then on spend and then on save. So when you pay, then it is a payment platform, and when you spend, it is a shopping platform and then when you save, you are doing the financial services product. So right now the focus is on the first two lines of business and in a few years down the line, we will focus on the third line of services as well.
Going ahead are there any listing plans?
After three years when we break even we will definitely look at listing.
In the next leg of growth, will the focus be on acquisition as you have funds of Rs 3,200 crore earmarked for it?
If you look at the payment system, we solve everyday payment problems and what we have seen is that instead of waiting for offline merchants to accept payment, if we can get those merchants to the mobile platform then they start accepting digital payments. So, we believe that we will bring offline merchants onto the mobile platform and they will then use our wallet. And to do that, we cannot build everything, so we will help build the ecosystem where we will have take of 20-40 per cent in such companies.
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So does that mean that the focus is more on investments and not acquisitions?
Yes, that is right. I don’t think we want to run their companies. Instead, we want to propagate Paytm to a greater number of consumers. And to do that, we want to help these entrepreneurs propagate Paytm and in return allow them to leverage our marketing and customer base. So it is not an acquisition, but it is more investment-led.
How many investments have you made so far, and which sectors would it be?
We have made about 15 investments so far and they have been mainly made into logistics companies, commerce platform and transaction-led platforms.
What is the size of these investments?
There are two kinds of investments — one would be under $10 million, and the other kind would be more than $100 million. We are more interested in making the smaller investments more often and a few select cases of larger investments. There is an opportunity to make the larger investments and there are companies that are getting created every day. We don’t think there are clear winners yet, and we don’t want to back one with such big investments until and unless we are clear about it. So typically our investments so far have been under $10 million.
How many more companies are you looking to invest in and by when can we see that?
We are looking at investing in 10 or 15 more companies. If we end up doing the larger investments, then it will be within a time period of two years or so. Currently, we are looking to invest in companies that help our merchants in carrying out their work. We have realised that logistics is an important area and we will definitely focus on it. Currently, there are talks on with companies in this space and paper work going on, but we believe that it should be done by next month.
When do you expect to break even?
We think we will be able to breakeven in another three years, by 2018. Currently, the deficit in the amount of money we spend in a month versus the amount of money we make is about Rs 150 crore.
Are there more investments being lined up by Alibaba?
Currently, Alipay has 25 per cent and our whole funding of Rs 5,000 crore is equity led and that is all.
You are planning to up the consumer base from the current 100 million, to 500 million, which will require more investments. Will Rs 5,000 crore be enough or would you need to raise more?
If we breakeven in three years, then we will expand on our own. So, the Rs 5,000 crore is the money that we need for the next 15-30 months. So, right now, there are no plans for more capital coming in.
We have seen deep discounting in mobile wallet space. How long do you think it will be sustainable?
It is also a business of the last man standing and so people need to build business models that can sustain beyond this. So we are going through the cycle, and we don’t participate is such aggressive discounting. Our understanding is that customers have a lot more fundamental offerings from us and we want to believe that consumers will still use us even when there are no discounts.
What is the growth roadmap for Paytm?
It is going to be a three-step journey for us. First being the focus on pay, then on spend and then on save. So when you pay, then it is a payment platform, and when you spend, it is a shopping platform and then when you save, you are doing the financial services product. So right now the focus is on the first two lines of business and in a few years down the line, we will focus on the third line of services as well.
Going ahead are there any listing plans?
After three years when we break even we will definitely look at listing.