The payment service provider sells shares on the two leading Stock Exchanges, achieving record initial trading values for a desi tech startup. Hugely popular for small everyday payments, Paytm now needs to figure out how to make money for its investors.
Investors Respond Well
For a company as recognizable across India as Paytm, it comes as no surprise that when the payments gateway launched its Initial Public Offering (IPO), Mumbai stock exchanges reported back substantial interest in their shares. Large institutional investors Ant Group, Softbank and Berkshire Hathaway already own about a third of the company, with dozens more raising $1.1 billion a week before the IPO listing.
In total, Paytm aims to raise around $2.5 bn in this funding round, making it the biggest IPO, above Coal India’s $2 bn raised in 2010. More importantly, it takes Paytm’s total valuation to around $20 bn, effectively rating it the biggest tech startup in the Union, passing Zomato’s $5 bn valuation.
The average desi user knows Paytm as a popular payment provider for everyday bills, groceries, Lottoland and other famous online lotteries and games. Accepted across the nation by shop owners, taxi drivers and all kinds of vendors, the new round of financing launches the brand in top financial orbit, underlining the growth of India’s digital economy.
Payments Big and Small
Parent company One97 Communications launched its payment service barely over a decade ago, quickly becoming a hit with the convenience of QR codes and peer payments via mobile. In a nation historically dominated by cash transactions, Paytm managed to sway millions of consumers into using it for everyday payments.
Industry research points out that a number of online lottery sites accept Paytm. Crucially, the growing digitization of online gaming for money could bring the lottery market to double its value, currently reported at $5 billion. More and more users turn to digital media and online casino entertainment in general, with rural consumers catching up quickly to their urban counterparts.
In the past few years, there have been considerable efforts on behalf of the Centre to bring down the amounts of cash used on a daily basis. Withdrawing banknotes was a major step in that direction, and Covid distancing measures also did their part. But the convenience of contactless and mobile payments seems to be appreciated by a naturally growing majority of users, as vendors accept payments as low as Rs 10.
Growing in Size but Not Efficient Yet
Paytm’s CEO Vijay Shekhar Sharma admits that the company has not made a profit in the past three years. India’s youngest dollar billionaire, according to Forbes, has added an e-commerce platform to the Paytm portfolio, yet for all the wide market coverage the payment gateway is struggling to make its operations sustainable.
Last year saw the company turn a revenue of almost 32 billion rupees but still lose a net 17 billion. With 114 million active users currently on record, Paytm is expected to soon find the “path to profitability” and justify both public hype and investors’ financial backing.