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Vijay Shekhar Sharma: The cashless king

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From humble beginnings, Paytm founder Vijay Shekhar Sharma now plans to list the company on stock exchanges and raise $3 billion at a valuation of over $25 billion. That could well be India's largest IPO ever

Vijay Shekhar Sharma: The cashless king
"Why be a part of a gang of horses when you can own the horses?" said Vijay Shekhar Sharma while making his first appearance on CNBC-TV18 way back in 2006.
If at all someone is compiling all his one-liners, then this must make it to the Paytm Founder's Book Of Quotations. Even as a young man, Vijay Shekhar Sharma loved to talk through his favourite one-liners. You must have heard, "Go big or go home".
When a young entrepreneur talks big, it is often dismissed as entrepreneurial bravado or just youthful fancy.
Fast-forward to 2021 and Vijay Shekhar Sharma plans to list Paytm on the stock exchanges and raise $3 billion at a valuation of over $25 billion. That could well be India's largest Initial Public Offering (IPO) ever. This is not small feat, considering the digital payments platform is just a decade old.
Let's take a step back first
As the country prepares for a third wave of the COVID-19 pandemic, Vijay Shekhar Sharma is busy managing Paytm's Special Task Force to help employees secure oxygen concentrators.
Alongside, he must be preparing presentations for roadshows, and most seriously, trying to turnaround Paytm's financials before the tight deadline of listing by Diwali this year.
In 2020, the nationwide lockdown shut multiplexes, malls and markets, leading to a collapse in merchant payments. At the time, Paytm suffered too, but not for long.
Following seven months of lockdown, online payments picked up. Although the entire world lived behind doors for most part of the year, India surged ahead of China and the US in the global tally for digital payments with over 25 billion transactions in 2020, according to an ACI Worldwide report. Vijay Shekhar Sharma's Paytm is more of a catalyst than a by-product of this digital phenomenon.
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This comes at a cost. To get Indians to go cashless in an intensely tight market, Paytm and its peers offered rewards, cashbacks and scratchcards. Once, Sharma remarked, "We have spent more money than any government programme to change consumer behaviour."
For FY21, Paytm reported a loss of Rs 1,704 crore against a loss of Rs 2,943 crore in the corresponding year. That's two consecutive years of narrowing in losses. But, is it narrowing fast enough?
What lies ahead of Sharma's Paytm and several unicorns like Zomato and Flipkart, who are also looking to list this year, is this common problem of 'cash burn'. So far, Sharma has pumped in close to $3.5 billion into the company.
In FY21, Paytm's revenue declined by about 10 percent to Rs 3,186 crore from Rs 3,540 crore in the previous year.
Paytm lags behind Google Pay and Walmart's PhonePe in UPI transactions. But, the Unified Payments Interface (UPI) space is a 'revenue-less cash-guzzling land grab', says a Bernstein report. Nearly 83 percent of the transactions take place as individuals send money to each other, which is free. Google Pay and PhonePe are both struggling to generate revenue.
Paytm gets some revenue when its 20 million-odd merchant partners process transactions, pay a monthly fee for Soundboxes or Point of Sale (PoS) devices. However, this is only one of Vijay Shekhar Sharma's focus areas as he looks to jack up the topline.
Vijay Shekhar Sharma (File Image: Reuters)
He must have listened to one of his favourite Pink Floyd songs, "Breathe". It goes like this: "Don’t sit down, it's time to dig another one".
Over the last few years, he has quickly added another layer to the zero-sum game of payments and e-commerce. That's financial services. Now, Sharma explains, "The Paytm business model is: acquire consumers or merchants on payments, build commerce on top of it and then scale financial services."
Today, Paytm users can also 'Buy Now, Pay Later', trade stocks or gold, secure an insurance, and if one is bored, play fantasy cricket or rummy and make some quick cash.
The non-payments side of the business could contribute nearly one-third of the revenue by 2023, according to a Bernstein Report.
This looks like a much better pitch to conservative Indian investors, who say, "Show me the money!" Vijay Shekhar Sharma is already sending a message to them. "Paytm will reach break-even by the end of 2021," he told CNBC-TV18.
Paytm, Vijay Shekhar Sharma Vijay Shekhar Sharma (File image: Reuters)
Despite the regulatory hurdle to jump when it concerns Small Finance Bank and insurance licenses, one thing is clear: Vijay Shekhar Sharma's aspiration for Paytm is larger than one thinks. Once, he said, "If we can get half a billion people on Paytm, we'll become the world's largest financial institution."
At present, Paytm has at least 350 million registered users. Being the top beneficiary bank for UPI transactions, Paytm Payments Bank is already beating old-guard SBI in this era of digital payments.
Surely, even to Vijay Shekhar Sharma, Paytm's metamorphosis must be confounding. When someone asks him to explain what Paytm is today, he says, "It's logical to compare us to a Bank!"
The Origin Story
There is a Vijay Shekhar Sharma story that is often told.
Today, his net worth is over $2 billion. Once upon a time, two cups of chai a day were a luxury to the billionaire founder of Paytm. In the early 2000s, caught in a debt trap at the time of setting up One97, he skipped bus rides and walked to meetings in South Delhi just so he could afford one hot meal a day.
“Money plays a big role in life,” said the 27-year-old young Vijay Shekhar Sharma on CNBC-TV18 in 2006. By then, Sharma was back in the game with One97 serving some of the largest private telecom players at the time like Airtel, Hutch, Idea and Tata Indicom. The company offered value-added services such as jokes, cricket scores, ringtones, horoscopes… “You could talk to a Panditji by calling,” said Sharma.
Over the next five years, One97 became the go-to voice and data company in India. In 2010, Sharma thought of listing One97 on the stock exchanges with a plan to raise Rs 120 crore, but decided against it. There was something else on his mind. Paytm - Pay Through Mobile.
When Sharma pitched the idea of Paytm to the board, they were dismissive. The board said, “We are afraid you may not be a great consumer brand builder.” In their eyes, he was a technology guy, a successful B2B salesman.
Seeing ‘the opportunity to build a payments system for the mobile age’, Sharma put $2 million out of his pocket to get the board’s go-ahead for the digital payments platform.
In August 2010, Paytm came alive, helping people get their prepaid mobile recharge or ‘top-up’ without the assistance of the local store.
Soon, Uber came on-board allowing riders to pay using Paytm. Then, the Indian Railways. Paytm gained currency as public utility companies started accepting electricity and water bill payments via Paytm. The Paytm Wallet, the holding account that allowed users to pay for metro, movies and merchandise, became the base of the pizza as toppings were added each year.
Paytm founder Vijay Shekhar Sharma Paytm founder Vijay Shekhar Sharma
‘Mere Paas Ma Hai’
By 2015, Paytm had a user base of 120 million people with one-third of them being monthly active users. Vijay Shekhar Sharma wanted to use the payments platform to build an e-commerce platform.
He decided to go toe-to-toe with Amazon and Flipkart, who were driving India’s e-commerce play. Who could understand Paytm better than Alibaba’s Jack Ma, the pioneer of China’s digital payments and e-commerce revolution?
In fact, Sharma wanted Paytm to be India’s Alibaba and Alipay. So, Sharma flew to China and over a two-hour meeting, convinced Jack Ma to back Paytm. By the end of 2016, Paytm had drawn Rs 5,000 crore worth of investments from Alibaba Group in exchange for a 40% stake in the company. A matter of pride, Vijay Shekhar Sharma would later go on to say, “Mere Paas Ma Hai. Jack Ma.”
Flush with cash, Paytm signed a plump deal with BCCI to become the title sponsor of all international cricket matches to be held in India. Full-front page ads in newspapers, hefty discount offers and ‘customer acquisition costs’ led to a cash burn of Rs 1,500 crore annually. “It’s an obligation to change consumer behaviour,” said Sharma, defending the marketing spend. Paytm was bleeding cash.
The Demonetisation Dhamaka
On the evening of November 8, 2016, Vijay Shekhar Sharma was in Mumbai to escape New Delhi’s air pollution and also to accept an award on behalf of Paytm for being a disruptive startup.
“Everybody’s phones were ringing. After picking up the award, I told myself, ‘Let’s see what’s happening!’” said Sharma. When he opened his phone, there were hundreds of messages, each saying, “The Prime Minister has banned Rs 500 and Rs 1,000 notes!” Overnight, 86% of the country’s currency went out of use. The event fundamentally changed the way Indians handled money.
Vijay Shekhar Sharma’s first thoughts upon hearing the news: “Does this mean people will be allowed to do digital payments?” The answer came in the affirmative.
Sharma and his team went into an overdrive mode and published a front-page ad in some leading newspapers, seeking to address the two immediate questions in people’s minds: How do I make payments? How do I receive payments? The ad gave the answer: Paytm Karo!
As people lined up fruitlessly in long queues at ATMs and banks, Paytm’s user base grew from 140 million in October, 2016 to 270 million in November, 2017. In Sharma's opinion, the colloquial use of ‘Paytm Karo’ was the largest contributor to growth.
In 2017, only two Indians figured in TIME’s list of 100 most influential people in the world: Narendra Modi and Vijay Shekhar Sharma. In India, media outlets called Sharma, “The Cashless King.”
Nandan Nilekani, co-founder of Infosys, the man behind UPI and AADHAAR, wrote for TIME, “Vijay Shekhar Sharma seized the moment.” But, issued a friendly warning too. “He will face new challenges from deep-pocketed and more-experienced competitors.”
Sharma got a treasury of his own. In May 2017, Masayoshi Son’s SoftBank invested $1.4 billion valuing Paytm close to $8 billion.
The following year, one of the Fund Managers at Warren Buffet’s Berkshire Hathaway bumped into a Paytm board member unknowingly. The Paytm board member, upon introduction, was requested to talk more about the company. Thus, Berkshire’s interest was confirmed.
Sharma went to Omaha in the United States, but didn’t get a chance to see Warren Buffet. However, he secured a $350 million funding from one of the world’s renowned investors.
In 2019, Paytm raised $1 billion at a valuation of $16 billion in the round led by T Rowe Price with participation from existing investors ANT Financial and SoftBank Vision Fund.
If the IPO goes through this Diwali, Jack Ma, Masayoshi Son and Warren Buffet’s Berkshire Hathaway could walk away with handsome returns, that’s if they wish to exit. Only time will tell!
Vijay Shekhar Sharma, founder of Paytm's parent One97 Communications, speaks during the launch of a Citibank and Paytm credit card in Mumbai. (File image: Reuters)
Vijay Shekhar Sharma Speaks The Tongue
In the initial days at Delhi College Of Engineering, Vijay Shekhar Sharma occupied the front rows. Soon, unable to face the professor’s questions in English, an experience Sharma describes as the ‘Taare Zameen Par’ moment with letters flying in the air, he moved to the back benches.
Coming from Harduaganj near Aligarh in Uttar Pradesh, Sharma went through hindi-medium schools. He taught himself English by listening to rock songs and reading two books at the same time - one in English, the other in Hindi.
Over the years, the Paytm CEO has dealt with the anglophone media in the country rather well. In recent years, the popularity and the following have turned him into one of the most heard, the most vocal, and at times, the most combative of business leaders. Case in point: His fight with the global tech giants now infamously dubbed ‘The Payment Wars’.
In 2018, Sharma called Facebook ‘the most evil company in the world’. His comments came after Facebook-owned Whatsapp began rolling out a digital payment feature on its messaging app in India. He accused Whatsapp of unfairly entering India’s digital payments market by breaking NPCI rules on UPI. In a tweet, he said, “Whatsapp is killing the beautiful open UPI system with its custom close garden implementation.”
Given Whatsapp’s potentially large user base, Paytm’s peers - Mobikwik, Freecharge and PayU - felt Sharma saw a threat. Some even accused him of double standards. Unfazed, Sharma kept up his offensive against Whatsapp, saying ‘it arm-twisted the UPI’.
More recently, he said Whatsapp and Facebook are abusing their monopoly. “Move on to the Signal app now,” he said, urging users to quit Whatsapp over privacy concerns.
This is not the first time that Sharma faced-off with Facebook. When Mark Zuckerberg made personal phone calls to internet business founders to gather support for Free Basics - an initiative to offer access to basic online services without data charges - there was one person whom he could not convince: Vijay Shekhar Sharma, who offered total support to Net Neutrality in India.
After the tiff with Facebook, Sharma’s came out swinging at Google in 2020. Google had removed Paytm’s main app from Google Play Store for violating its gambling policy. The move came in response to Paytm’s use of cashback offers to promote its fantasy sports platform - Paytm First Games. The platform, which also existed independently as an app on Play Store, was taken down too.
Sharma retorted by calling Google “the judge, jury and the executioner”. Google restored Paytm’s app only after the cashback offer was withdrawn. “We are at the mercy of our gods at Google,” he told CNBC-TV18. That was not the end of it.
Around the same time, Sharma led the industry’s cry against Google’s plan to levy a 30% charge on app developers selling digital goods on Google Play Store by using its in-app payment system. In response, Sharma said Google’s android and Play Store dominance gives it government-like powers and launched Paytm Mini App Store as an alternative to Google Play Store for small app developers.
Following the backlash, Google has since lowered the Google Play Store billing fee to 15% on the first $1 million revenue. Sharma called it ‘hogwash’. In an interview with CNBC-TV18, Sharma said, “I call upon Google not to charge anything for the next five years for Indian developers.” On Twitter, he urged app developers and other stakeholders to come together on this issue and make India Atmanirbhar.
However, for Sharma, some of these issues have acted like a double-edged sword. In June 2020, after the border standoff with China, the Indian government banned 59 Chinese apps. On Twitter, Sharma appreciated the move, calling it a bold step in national interest and a step towards Atmanirbhar Bharat.
However, Mobikwik was quick to capitalize on the government’s Chinese apps ban and called itself the ‘Truly Indian Payments App’. Twitterati noticed and termed it a ‘surgical strike on Paytm’ as one of the company’s largest investors is Chinese - Jack Ma.
With Jack Ma finding himself in trouble with the authorities in China and the many controversies around Chinese investments in Indian startups, the Alibaba Group could distance itself from Paytm using the IPO as a chance to see the investment to its logical end with windfall gains.
As Paytm prepares for India’s largest IPO ever, it can be said that ‘owning those horses’ certainly let Vijay Shekhar Sharma escape the stables and rise up the stands to mark his name on the honours board.
When the bell rings on Dalal Street, he will hear the words of advice he often gave himself, “Remember that you are not up against a large company, you’re up against opportunity, against the mindset of this country, against a customer base which is yet to convert into a technology champion and you have a full chance. You have as much of a chance as somebody else."