The big news this week in the startup ecosystem is Paytm’s likely funding round of $2 Bn, which would take the company’s valuation to $16 Bn. SoftBank, Alibaba, T Rowe Price and other investors are expected to join the latest fundraising round for the fintech giant. And riding on this funding, the company is looking to start generating cash from its user base in the near future. Speaking to reporters at the India Mobile Congress on Monday (October 14), founder Vijay Shekhar Sharma also revealed more about the Paytm IPO plans.
According to a media report, Sharma said Paytm will be looking to get listed on the stock exchanges after 2021, when the fintech company starts generating cash.
“The plan was always to start thinking of an IPO 2022 onwards. I have always wanted to go for an IPO (initial public offering) after the company starts generating cash.”
While Paytm itself has come up against stiff competition in the digital payments arena thanks to the introduction of unified payments interface (UPI) and Aadhaar-based payments, the company on Monday said that it has achieved profitability at the contribution level. Vikas Garg, deputy CFO, Paytm said that the company’s contribution margin has grown from a loss of 30% to profit of 12% of the revenue.
Paytm said it defines contribution margin as revenue minus all direct costs incurred in providing services to customers. These costs include payment gateway, marketing expenses, promotional cashback and all kinds of charges/commissions paid by the company.
To become earnings before interest, tax, depreciation and amortisation (EBITDA) positive, the company will have to earn to recover people and establishment costs. Garg also said that the company has recorded a gross transaction value (GTV) of $100 Bn, up from GTV of over $50 Bn, while clocking 5.5 Bn transactions in FY19.
Paytm has close to 130 Mn monthly active users and more than 450 Mn registered users, as of July 2019. The company had recently said that it has allocated INR 750 Cr to expand its monthly active users. The platform planned on targeting 250 Mn new customers, and onboard new merchants in Tier 2 and Tier 3 cities and towns.
For offline payments, the company aimed to enable 20 Mn retail merchants to accept digital payments through Paytm QR. Further to grow offline merchant payments, Paytm said it will invest INR 1,000 Cr more this year.