Paytm guns for $100 billion and the holy grail, profitability

Vijay Shekhar Sharma, founder of e-commerce firm Paytm, is an ambitious man. He wants to make Paytm a $100 billion company well before larger rivals Flipkart and Snapdeal.

To get there, he has created a business model that differs from the current wisdom of driving consumer buying through deep discounts. Instead, it focuses on offering unique products.

“Discounts are not sustainable and we can’t keep burning money forever. I want to build a profitable company,” Sharma told Business Line .

The other thing Paytm is doing differently is running the e-commerce business without warehouses.

The company partners sellers with their own infrastructure. Paytm has 30,000 sellers and wants to take that number to 100,000 by the end of the year. Flipkart has 27,000 sellers.

The third thing that Sharma is relying on is the backing of Alibaba, the world’s largest ecommerce company, with $170 billion in revenues. The Chinese Internet company, founded by Jack Ma, invested about $575 million in Paytm by acquiring a 25 per cent stake in it, in January. Jack Ma is likely to infuse more money in the coming months.

Under Ma’s care “Jack Ma ensures that his team members visit Paytm once every month to guide us. Our team also goes to China once a month,” Sharma said.

The strategy seems to be paying off for Paytm, which started as an online recharge and payment company and entered the e-commerce segment early this year. The company has already clocked $1.5 billion in sales in the last six months and is expecting that to double to $3 billion by the end of this year.

Paytm currently has two businesses — Wallet and Commerce. The wallet business contributes about 60 per cent to overall revenues, with e-commerce at 40 per cent. Sharma expects e-commerce to become 60 per cent by the end of this year. The e-commerce arm achieved Gross Merchandise Value of $1.5 billion in six months; Flipkart and Snapdeal took 5-6 years.

Sharma is also diligent in spending cash. Compared to the bigger players, Paytm’s burn rate on marketing and advertising is less than the industry average of 5 per cent. Flipkart, with $4 billion in sales, spends $60 million every year on marketing and customer acquisition.

But when it comes to expanding presence Sharma has been quick. From just one office in Delhi, Paytm now has offices in Mumbai, Bangalore, Kolkata, China and Toronto, with 3,000 people.

Paytm is also strengthening its team. It has made three high-profile appointments to its board — Ruchi Sanghvi, the first woman engineer at Facebook, WhatsApp global business head Neeraj Arora and InMobi founder Naveen Tewari.

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