Back‘Firms only as strong as their cash reserves now’
Paytm saw a 15% increase in overall payment transactions last month on its platform, says founder and chief executive officer Vijay Shekhar Sharma
PremiumBENGALURU : Payment startups in India are moving towards an online-only approach to offset the decline in transactions at kiranas, or neighbourhood stores, amid an extension of the countrywide lockdown. With the domestic digital payments industry posting a 40% decline in payment volumes in March, the startups are hoping their revised strategy will pay dividends. In an interview, Vijay Shekhar Sharma, founder and chief executive, Paytm, spoke about growth being impacted by a quarter, hiring and new verticals. Edited excerpts from the interview:
One97 Communications Ltd (OCL, Paytm parent) had plans to be profitable in another 18-24 months. Has that changed with the current scenario?
Our incremental revenue plan would be extended by a quarter. But, owing to our digital-first strategy, after the next quarter, things will return to normal at the group level. We are confident that our losses on a year-on-year basis will be down, as we see revenues from other verticals pick up, in spite of an impact on verticals like travel and entertainment.
An important thing to note was while our travel and entertainment verticals were breaking even, they would spend these revenues on themselves. So, while they continue to be on our books, from a revenue contribution perspective, we aren’t seeing an impact.
How does this impact your IPO plan?
As we have said in the past, Paytm’s first goal is profitability. It is only after that we will set our roadmap for an IPO. But we are considering individual verticals and businesses under the OCL group for an IPO, depending on their profitability.
With travel and entertainment verticals impacted, which verticals will bail out Paytm?
We are focused on our financial services execution strategy, including insurance, wealth through Paytm Money and even banking. These verticals will outpace the impact on segments like travel and entertainment in terms of our revenue.
We are already seeing early signs of this: Insurance volumes are up by net 500% daily, we are also working on remote opening of Paytm Bank accounts and volumes on Paytm Money are also up. We are pushing our content strategy (including gaming) and learning that monetization will come in due course as brands start advertising again.
Do you see an impact on the launch of newer verticals or on hiring?
We are hiring right now in senior profiles and expanding our financial services business, so you will see net additions in hiring on a year-on-year basis.
As far as commerce is concerned, we expect a delay in our O2O (online-to-offline) focused goods strategy. But with consumers becoming aware of online purchases, we will have a significant uptick in the online consumer base.
Have digital payments taken a big impact on Paytm, which is your core offering?
Not really, we saw a 15% increase in overall payment transactions last month on the Paytm platform. This is because of categories like insurance, bill payments and wealth management, when we look at it from a holistic level. So, we are not anticipating a fall.
OCL has seen the 2008 recession and now this slowdown. How do you evaluate both the situations?
The recession in 2008 impacted a certain industry, but the impact of 2020 is on every country and company. My understanding is that the cash in the bank will be the real decider, and companies should avoid experimenting big.
Being conservative is the key when it comes to operating costs, and reserve cash will be the real king.
Companies should slow down on lending operations, and we were lucky in some sense not to have a landing page for that segment yet.
How are these learnings incorporated in Paytm’s context?
Even we don’t know how long the current situation around the covid-19 outbreak will last.
We foresee a quarter worth of impact. There is no doubt that we will be doubling down on existing categories like payments, content and gaming, and will push usage in tier-3 and 4 geographies.
With our financial services strategy, digital payments and content strategy, we continue to be extremely relevant today.
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