Paytm's journey: From payments app to a fintech and now - Dalal Street

Think of Paytm and everyone is talking billions of dollars, especially more so with big names like Jack Ma and Ratan Tata being involved with it.

The first round of creative disruption began in corporate India in the year 1991 with Dr Manmohan Singh and Narasimha Rao's reform which has had beneficial consequences for India.

However, the second round of similar disruption was seen by many with the advent of the start-up ecosystem that revolutionised several sectors, with Paytm pioneering one such change by accelerating India's fintech revolution.

Also Read: Paytm makes tepid market debut, stock lists at 9% discount to issue price 

Humble beginnings

In 2000, Vijay Shekhar Sharma established Paytm's parent organisation One97 Communications, through a Rs 8 lakh loan. He went on to finally establish the Noida-based Paytm in 2010 as a prepaid mobile and DTH (direct-to-home) recharge platform.

But from those humble beginnings, he ended up catapulting Paytm into the country's most valued fintech start-up in less than a decade.  

Post the launch of the Paytm Wallet in 2014, it became one of the most used digital wallets across India. Over the course of the next few years, Paytm widened its base and expanded into e-commerce through ticket bookings and online deals. Its use leapfrogged in the year 2016 after the government's shock ban on high-value currency notes magnified digital payments.

After the demonetisation, "Paytm Karo" became the legendary catchphrase that every Indian got hooked on to when it came to online shopping.

In the year 2017, the company became the country's first-ever payments app to surpass the threshold of 100 million downloads. Today Paytm boasts of 1.2 billion monthly transactions (as of March 1, 2021) with over 150 million monthly active users.  

Also Read: Paytm crosses milestone of Rs 1 lakh crore market cap despite weak listing

With this, the digital payments giant commands the highest market share in the offline merchant payments space, with 15 per cent month-on-month growth. The company has branched out into several services comprising gold sales, insurance, bank deposits and remittances, and movie and flight ticketing.  

After Paytm pioneered digital payments in the country, the space soon boomed as Amazon, Google, WhatsApp and Walmart's Phone Pe also launched their payment services to grab a slice of the lucrative market expected to grow to over $95.29 trillion by the end of March 2025, according to EY.  

Paytm IPO - Making history  

With the biggest ever IPO in India, Paytm scripted history on Thursday (November 18, 2021). Its public offer is bigger than Coal India's Rs 15,200 crore IPO in 2010.  

Despite making a tepid market debut, Paytm managed to cross the milestone of Rs 1 lakh crore market capitalisation. The digital payments firm reached a market cap of Rs 1.19 lakh crore on BSE.

The share listed at Rs 1,955 on BSE, a discount of 9.06% to the issue price. Later, the market cap of the firm fell to Rs 1.10 lakh crore, as the share further dipped 20.47% to Rs 1,704 on BSE.

On NSE, the share of Vijay Shekhar Sharma-led company opened at Rs 1,950, a 9.30% discount to the IPO issue price. The share further fell 20.93% to Rs 1,700 on NSE.

There's no other fintech company quite like Paytm that's listed on the bourses. Despite being a loss-making company, the digital payments giant managed to create a strong buzz around its IPO.  

The public offer received bids for 5.24 crore equity shares against the offer size of 4.83 crore shares, according to information available from stock exchanges. Qualified institutional buyers (QIBs), who were less than enthusiastic in participating in the IPO in the initial two days, flooded the issue, seeking 1.59 times the shares reserved for them. 

Also Read: From earning Rs 10,000 per month to $2.4 bn net worth, here's Vijay Shekhar Sharma's story

Backed by marquee investors like Alibaba Group, SoftBank, Ant Financial, T. Rowe Price, SAIF Partners, Warren

Buffett's Berkshire Hathway, Rata Tata, and Mountain Capital, Paytm was looking at a valuation of Rs 1.47-1.78 lakh crore.  

Out of its IPO worth Rs 18,300 crore, fresh issue of shares comprises Rs 8,300 crore while existing shareholders will offload shares worth Rs 10,000 crore.  

Market share  

Paytm commands over 40 per cent of India's digital payments market in the country's biggest cities. Although it has yet to turn a profit, the company has benefitted from an overwhelming interest from foreign and Indian investors seeking a stake in India's surging internet economy.