Paytm says valuation rose 25% to $15 billion

Bengaluru: Paytm’s valuation has jumped 25% to $15 billion in the latest investment round that saw several employees cash out their shares worth $150 million, founder Vijay Shekhar Sharma said.

“Esops (employee stock ownership plan) worth $150 million were sold by Paytm’s employees to New York-based investors nearly three months ago, valuing the company at $15 billion,” Sharma said in an interview. He, however, did not disclose the names of the investors. Paytm, owned by One97 Communications Ltd, does not aim to raise funds this year.

Paytm was valued at $12 billion a year ago when Warren Buffett-controlled Berkshire Hathaway invested an undisclosed sum in the company. Although One97 did not disclose details of the deal, regulatory documents sourced from Paper.vc showed Berkshire had pumped in $300 million.

“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.

However, things have not been easy for Paytm. Several rival services, including Google Pay, Amazon Pay, BHIM, PhonePe and WhatsApp’s payments, are now challenging its near-monopoly status.

Paytm, on its part, aims to expand its array of service offerings. Recently, it expanded its education business with a full bouquet of services across payments, commerce, financial and academic products.

In FY20, it plans to cross ₹20,000 crore in gross merchandise value (GMV) for its education business. It is working with private and government institutions to offer admission forms, exam results, applications for government jobs, coaching preparations, scholarships, skill development and certification programmes, besides offering convenience to buy uniforms and books on its platform. It will also offer financial services such as education insurance and loans to students.

“The total online commerce that happens on our platform, where we make money, is about $45-50 billion,” Sharma said. “There is another $45-50 billion, which includes the likes of money transferred or small shop payments, where we don’t make money. We’re happy with $45-50 billion of GMV. Depending on a category, our weighted average fee is 1-2%.”

Paytm seems to understand the space well, particularly in small-ticket payments, but dealing with deep-pocketed competitors will remain a challenge, said experts.

“Paytm had a head start, but over a period of time lost out in the process of acquiring customers. As it was an initiative to change habits, they had to spend a lot in making people convert from wallet to mobile wallet. In the meantime, the competition caught up,” said Anil Joshi, managing partner at Unicorn India Ventures, a venture capital firm. “There’s competition, but Paytm is still the first choice as the brand recall is very high. However, they still need to figure out a profitable model.”