Paytm, India's largest digital financial services provider, has seen its valuation more than double in the past two years from $7 billion in 2017 when Japan's Softbank Vision Fund came on board. In the latest investment round, nearly three months back, several employees liquidated their shares in the company through secondary sale, fanning Paytm's valuation higher.
"ESOPs (employee stock ownership plan) worth $150 million were sold by Paytm's employees to New York-based investors, valuing the company at $15 billion," founder Vijay Shekhar Sharma told Mint, but he declined to disclose the names of the investors. That's a 25 per cent jump in valuation from $12 billion last year, when Warren Buffett's company Berkshire Hathaway invested $300 million in One97 Communications, Paytm's parent, for reportedly a 3 per cent stake in Paytm.
While Paytm does not aim to raise funds this year, it has witnessed a surge in investor interest, especially after the Oracle of Omaha came on board. Buffett's interest in Paytm raised eyebrows not only because it was one of his rare investments in the tech space but also because it was his first investment in a private tech firm, and an Indian one to boot. Moreover, One97's rapid expansion and diversification drive is also grabbing eyeballs. Apart from its thrust on Paytm Payments Bank Ltd, which reported a Rs 19-crore profit for FY19, One97 is also hoping to make Paytm Money the third unicorn in its stable after Paytm Mall and its flagship brand.
Paytm has also recently expanded its education business with a full bouquet of services across payments, commerce, financial and academic products. In FY20, it plans to cross Rs 20,000 crore in gross merchandise value (GMV) for its education business. It plans to offer financial services such as education insurance and loans to students. "Paytm is contribution positive, meaning that we are spending money only to acquire new merchants and customers. Merchants pay us, not the customer," said Sharma. There are about 14 million merchants using Paytm services and it plans to increase the base to 24 million by the end of this fiscal.
Currently, Paytm sees 800-900 million transactions a month. According to him, the total online commerce that happens on the Paytm platform - where the company actually makes money - is about $45-50 billion, and he's "happy" with this GMV figure. "There is another $45-50 billion, which includes the likes of money transferred or small shop payments, where we don't make money," Sharma explained.
While Paytm has the backing of several other behemoths, including China's Alibaba Group Holdings, it has a tough battle ahead if it wants to hang on to its leadership position. Apart from deep-pocketed rivals like Flipkart-owned Phonepe and Google Pay, which are fast catching up, many new players like WhatsApp Payments and Reliance Jio and Amazon Pay are also eyeing India's $200 billion digital payment market, which is expected to mushroom to $1 trillion by 2023.