Paytm was the poster boy for India's tech startups, only to lose two-thirds of its value since its IPO and become a symbol of the industry's crash. Now its founder promises a sharpened focus on financial performance to convince investors of the money-losing company's prospects.
The digital-payments provider is set to become India's first
Internet company to hit $1 billion in annual revenue by the end of this fiscal
year in March, said Vijay Shekhar Sharma, 44. The brand, known formally as
One97 Communications, is also shifting its attention from growth toward
profitability, Sharma said in his first extensive interview following the
high-profile public debut in November.
“We're earnestly chasing the $1 billion goal,” he said
during an hours-long conversation last week at Paytm's new chrome-and-glass
headquarters in Noida, outside New Delhi, in a vast green expanse filled with
wandering cattle. “For me, the public listing was a sort of graduation, and
taking Paytm to break-even and to profits gives me a clarity of purpose.”
Paytm's stock-price collapse exacerbated a crisis for
India's startups, sending valuations plummeting as investors began to grow
cautious about their earnings potential. Young firms -- dozens of which had hit
unicorn status as capital flowed to everything from online retail to digital
learning in the country of 1.4 billion -- suddenly saw their fundraising plans
grind to a halt. To make matters worse, the war in Ukraine and fears of a
global recession further clouded the picture for startups worldwide in 2022.
Describing his approach as a rewind-and-reset, Sharma is on
a mission to win back investors. And he'll have his hands full: Paytm's
operating losses widened over the past year to about $350 million, competition
is intensifying and investors have lambasted the lack of clarity in the
company's business model.
One step toward regaining trust is a demystifying of Paytm's
revenue structure, said the founder, who is also the company's chief executive
officer. He said its work can be simplified to two short lines: Paytm is in the
business of payments, and it sells loans.
India's payments market differs from that of more developed
countries, as it bypassed card-based systems popular in regions such as Europe
and the US to jump directly from cash to mobile device payments. While that's
attracted droves of contenders like Alphabet's Google Pay, Amazon's Amazon Pay
and Walmart's PhonePe, Sharma is confident Paytm's products — some modeled on
success cases in other markets — will help it retain its leadership position.
Its Sound Box, for instance, is a $2-a-month subscription
which instantly reconciles payments and announces a successful purchase via a
speaker at the merchant's counter. Another product generates a unique QR code
for each transaction and lets shoppers pay swiftly through Paytm's smartphone
application as well as other apps — a model already prevalent in China.
“I want to make Paytm the most relevant payments company of
our times,” he said, dressed in a checked shirt and blue jeans, seated in a
conference room framed against a distant backdrop of high rises.
To expand Paytm's reach, Sharma has steadily ramped up its
lending business. While taking on traditional banks is a challenge, Paytm is
convinced it'll win over users in what is currently a credit-starved market.
In both payments and lending, Paytm has started to publish
more metrics. It's revealed more data on users, revenue streams and loan
disbursals, treating investors on par with board members -- and so far, the
numbers have been beating internal expectations, Sharma said.
Sharma, who grew up the son of a teacher in the small town
of Aligarh in central India, founded Paytm parent One97 Communications over two
decades ago. The company began offering digital payments in 2014, and has since
snared a who's who of global investors including Masayoshi Son's SoftBank
Group, Warren Buffett's Berkshire Hathaway and Jack Ma's Ant Group, growing
into the country's most ubiquitous payments brand.
If the early years were challenging, this has been Paytm's
most grueling phase ever. The IPO shone light on Paytm's business model,
allowing investors to more closely scrutinize the company's earnings logic and
valuation. The founder defended both, citing the successful listings of
internet peers like Nykaa and Zomato and bankers' advice on the maturity of
Paytm's revenue model. Paytm plunged 27 percent on the first day and is
currently down more than 60 percent from its IPO price.
“On hindsight, the pricing and the timing look haywire,”
said Sharma. “Used to private exits where things are a lot more under control,
we weren't prepared for this.”
In the past months, Sharma has told investors that his
strategy will allow Paytm to reach operational break-even by September 2023.
The company has slashed spending and is considering an exit from a pricey
cricket sponsorship and terminating an agreement to acquire insurer Raheja QBE
General Insurance.
“Earlier the team used to be like, ‘Cricket sponsorship?
that's so cool!' to now, ‘How much money can we save if we gave that up?'” the
CEO said.
Skeptics say profitability will remain an uphill battle.
Analysts at Macquarie Capital Securities (India), who were early to predict
Paytm's stock decline, said in March that the shares would plummet further to
Rs. 450. Sharma said board member and early investor Ravi Adusumalli, founder
of Elevation Capital, recently told him he'd prefer $1 billion in profit over
$1 billion in revenue.
Putting his money where his mouth is, Sharma said his
personal stock grants will vest only after the shares stay sustainably above
the IPO offer price.
“I'm going to be the last person to be paid in this
company,” he said. “One day soon, we will get our due.”
0 comments:
Post a Comment