Paytm to separate payments business from e-commerce

New Delhi: One97 Communications Ltd co-founder Vijay Shekhar Sharma, who was one of the 11 recipients of a payment bank licence from the Reserve Bank of India (RBI) on Wednesday, said he will separate the e-commerce and payments businesses by creating a new arm, Paytm Payment Bank Ltd. The new unit will handle all of the company’s payments businesses including the Paytm wallet, while the e-commerce business will continue to remain under One97 Communications.

Alibaba Group-backed One97 Communications will hold less than 40% stake in Paytm Payment Bank Ltd, while Sharma will hold the majority 51% stake. The remaining stake will be held by another subsidiary of One97.

According to Sharma, RBI regulations demanded that an Indian promoter should own a majority stake in the company.

The new entity, which will be registered in the next three months, will issue wallets in future and the wallet licence with One97 will be rolled back into Paytm Payment.

The new entity will have a separate leadership team and Sharma will look for a new chief executive officer to run the payments subsidiary. “We will hire 2,000-2,500 people in two years for this company.”

On Wednesday, RBI gave an in-principle nod to 11 entities, including Reliance Industries Ltd, Aditya Birla Nuvo Ltd, Bharti Airtel Ltd and Vodafone India Ltd, to launch payment banks.

“Licence brings us the third part of our business model: Pay, Buy and Save. And by savings, I mean that consumer deposits can now come, which will make payments far more seamless as the cash will be immediately available within your wallet,” said Sharma.

“Earlier, consumers did not have the incentive or the intent to keep balance in wallets. But now, with consumers getting interest on their deposits, it will be like any other savings bank account.”

The company plans to have on-ground touch points and banking correspondents to grow its reach and bring the unbanked on its platform. By 2020, it plans to have more than 500 million users. “We want to create a new audience to the banking system; the deposits will come from the new people who want to come to the banking platform for the first time,” said Sharma.

In February, Chinese e-commerce giant Alibaba Group, through its affiliate Ant Financial, announced plans to buy a 26% stake in Paytm by pumping in close to $575 million in a move to tap the fast-growing mobile payments business in the country.

The company is looking to raise another $400 million-plus from Alibaba, Mint reported in May.

The company has more than 102 million wallets and expects the number to cross 115 million by December. In April, Paytm said that it is looking to cross monthly annualized sales of $4 billion in gross merchandising value (GMV, or price of goods sold) by December, with nearly half of it coming from its marketplace business.

Paytm has 80,000 merchants on its platform and is expecting to touch close to 100,000 by the year-end after it allows zero-commission listings. Noida-based Paytm is also backed by venture capital firm SAIF Partners, which holds close to a 37% stake in the company.