India's largest digital payments service provider Paytm is not concerned about the disappointing performance of its initial public offering last month and is sticking to its business plan that has scaled up because of the “necessary capital” the company has acquired, its chief executive said.
Paytm will stay the course as the capital it gained will allow it to venture into other financial services starting with banking and credit, Vijay Shekhar Sharma said.
The company, headquartered on the outskirts of New Delhi,is backed by Japan's SoftBank Group and China's Ant Capital.
“The best part about the IPO is that we welcomed [a larger] number of people as shareholders. We are seeing tremendous uptake of the credit business, which is bringing money to the bottom line,” Mr Sharma, who is also Paytm's founder, told The National in an interview on the sidelines of the TiE Global Summit at Expo 2020's Dubai Exhibition Centre on Wednesday.
Paytm's $2.5 billion IPO in November, India's biggest, was touted by some as a signal that the South Asian country's appeal as a destination for global capital was growing, especially for technology investors seeking alternatives to China.
However, the IPO failed, as the company lost over a quarter of its value on its trading debut on the Bombay Stock Exchange. The 27.4 per cent plunge in One97 Communications, the operator of Paytm, surprised even critics and left retail investors and major money managers, including BlackRock and the Canada Pension Plan Investment Board, to deal with heavy losses.
On Wednesday, Paytm's stock dropped 7.8 per cent after a post-listing lock-up on sales of shares allotted to anchor investors expired. These investors can now sell shares as lock-up rules in India prevent them from doing so for a month after allotment.
Still, Mr Sharma insists that Paytm's path to profitability will be accelerated. It is aggressively pushing into the credit space, teaming up with partner organisations in India to deliver micro loans that amount to millions a month.
“Credit is taking off. We are seeing a tremendous uptake of the credit business that's bringing money to the bottom line,” he added.
“It is also revenue and profitmaking, which means many of our businesses will contribute to the [overall] income and will help make us break even and profitable in much less time than anticipated.”
India's financial industry is predominantly a banking sector, with commercial banks accounting for more than 64 per cent of the total assets held by the financial system, data from the Indian Brand Equity Foundation show. The government and central bank have taken various steps to help MSMEs gain easier access to financing.
Financial inclusion will also heavily rely on the adoption of technology, Mr Sharma said. The smartphone penetration rate in India — a country of 1.38 billion — was at 54 per cent in 2020, lagging behind major economies, and is expected to hit 96 per cent by 2040, Statista reported.
Asian and other emerging economies are prime examples of areas where mobile payments have taken off because of the growing acceptance of cashless payments using smartphones, Mr 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's clear that this domination means that the future of payments is mobile,” Mr Sharma added.
“The bigger the mobile penetration rate, the more opportunities there will be for financial inclusion. Smartphones are the most powerful tool and the solution to this.”
The number of internet users in India is projected to grow 45 per cent to hit 900 million by 2025, up from 622 million last year, the Internet and Mobile Association of India and Kantar Group reported.
Paytm is also monitoring developments in the cryptocurrency and blockchain spaces. The company will make moves based on what regulators say, Mr Sharma said.
Media reports on Wednesday said a major bill in the Indian Parliament to regulate cryptocurrencies would be delayed for several weeks.
“Cryptocurrencies and blockchain are obligations of newer companies to embrace. It is more about the complex problems of trust that we can solve by bringing in these technologies in place. Whether or not we will take this as a business model will depend on regulatory guidelines,” he said.
Paytm, which was founded in 2010, reported a loss of 4.74bn rupees ($62 million) in the three months to the end of September, up from 4.36bn rupees in the prior year period.