Apr, 2016     

RedSeer perspective on Paytm


Overall Business Volume (Mar 2016)

  • Paytm had an average of 19.5 lac transactions per day in Mar 2016 (excluding P2P transfers or transactions that add balance to wallet
  • GMV/GPV (Gross Payment Value) for all verticals was ~INR 1,700 Cr

Recharge and Bill Payments

  • Gross Payment Value (GPV): Increased to INR 800 Cr from INR 710 Cr in Oct, driven by higher ATV:
    • ATV: INR 180 in Mar vs. INR 145 in Oct 2015
  • Transactions: 14 lacs per day in Mar 2016 vs 16 lacs in Oct 2015; transaction share:
    • Mobile Recharge: 77%
    • Data Card: 11%
    • DTH: 6%
    • Bill Payments: 6%

Wallets

  • Transaction on Paytm (On-Deck): 7.7 lac+ daily Paytm platform transactions
    • 50-55% of all recharge/bill payments transactions (~7 lac daily)
    • ~52% of marketplace transactions (~40k daily)
  • 3rd Party (3P) Merchant Transactions: 4.3-4.4 lacs average daily transactions, with a monthly GPV of ~INR 390- 400 Cr, up from INR 335 Cr in Oct 2015:
    • Key Merchants: Uber: 25-30%, IRCTC: 8%
    • Offline Payments Share: 7% (30-35k daily transactions)/li>
  • Wallet Base:
    • Registered Wallets: 120 million
    • Active Wallets (having money): 50 million

Travel and Others

  • Travel (hotels and buses): INR 75-90 Cr GMV, up from INR 22 Cr in Oct 2015
    • 27,500 daily transactions
    • ATV: INR 1,000
  • Other verticals including events, insurance etc. :
    • INR 30-50 Cr GMV (moderate confidence, further breakdown unavailable)

The five verticals under the Paytm brand generated ~1,700 Cr of GMV/GPV in Mar 2016

Recharge and bill payments constitutes the largest business vertical for Paytm growth with ~14 lacs transactions daily as of Mar 2016

  • Average transaction value
    • Mobile Recharge: INR 120
    • DTH: INR 800
    • Electricity Bill Payments: INR 900
  • Within bill payments, electricity bills is
    one of the fastest growing categories
  • Recharge transactions geographic split
    • North India: 40%
    • East India: 10%
    • West India: 20%
    • South India: 30%

This document covers a perspective on the performance of Paytm along with the key initiatives taken by it and its focus areas.

Wallet 3P daily transactions stood at 4.3 4.4 lacs in Mar 2016; ~7.7 lacs daily on deck transactions were recorded

Wallet 3P Transactions

  • Total 3P Transactions and GPV: 4 ,30,000 4,40,000 daily transactions (excluding P2P,
    bank transfers and wallet loading transactions) with a monthly GPV of INR 390 400 Cr
  • Share of Top Wallet Merchants: Uber continued to be the largest 3P merchant with 25
    30% of all transactions. IRCTC followed with ~8% of all 3P transactions
  • Offline Merchants: Contributed ~7% of all wallet 3P transactions (30 35k transactions
    per day)

Wallet On Deck Transactions
Paytm wallet contributed the following transaction volumes to the overall business in Mar
2016:

    • 50 55% of all recharge/bill payments transactions (~7 lac daily transactions)
    • ~52% of all marketplace transactions (~40k daily

7.7+ lacs on deck transactions daily (including travel and other verticals)

Key Wallet Metrics

    • Wallet Base: ~12 Crores, Active Wallets in use (with balance): ~5 crores
    • Total amount parked in Paytm wallets at the end of Mar 2016 dropped
      to INR 100 Cr from ~150 Cr in Oct 2015, due to lower cash back to customers
    • KYC Compliant Wallets: 4 5% of all wallets (moderate confidence)
    • GMV split of wallet transactions by city tier

o Metro : 70%, Tier 1: 20 25%, Tier 2: 5%

Short term wallet focus is on increasing the share of KYC customers; in the longer term, Paytm is also looking at deploying wallet for B2B transactions

Key Focus Areas for Wallet Business

  • Increasing the share of KYC complaint customers
  • Ensuring that the wallet is used as a payment mode for every possible purchase
    for its customers, be it online or offline
  • In the longer term , Paytm is also looking at promoting wallet usage for B2B
    transactions as it believes that this is an untapped opportunity with a very high
    number of transactions taking place

Promotion Initiatives

  • Paytm is focusing on marketing its wallet aggressively in Tier 2 and Tier 3
    cities to acquire more customers, with offline marketing channels being preferred
  • One of the initiatives includes targeting restaurant transactions. On ground
    promotion by the Paytm sales team has led to a 15% m o m increase in restaurant
    payments taking place through wallet (further details
  • Paytm has also recently tied up with Dabawallas in Mumbai for wallet
    cashbacks. T he way it works is that if a person enrols for one month of dabba
    service, he gets the value of 5 days worth of service back in his wallet as cashback

Paytm plans to have ~1 lac offline merchants onboarded by the end of the
current financial year

Offline Merchants Strategy
Strategy Till The End of FY15 16
'In the last financial year, we were purely looking at gaining market share in the offline business and the management was not focusing on revenue part at all. Hence we were blindly looking to on board as many category B& C
merchants as possible as we believed that there is a huge potential for eliminating cash usage from these guys.'

'However, while we have succeeded in onboarding many such merchants, the average daily transaction count and value is quite small for them, leading to a very small GPV contribution. Thus the management is rethinking this strategy for next FY '
Forward Looking Strategy
'In the next financial year, we will be focusing on onboarding a lot more Category A merchants besides Category B and C ones'
'We are targeting a total offline merchant count of 1 lac by the end of FY16 17'
We expect more than 30 35% of total wallet 3P transactions to be generated from offline merchants by the end of FY16 17, up from ~7% now'

Paytm has planned aggressive investments and set ambitious targets for its
proposed payments bank

Payments Bank Strategy Payments Bank Launch Insights

    • Target launch date is Aug 2016 and the bank will likely launch with 20 million
      accounts. Paytm plans to turn its 120 million wallet users into account holders
      once the bank services are launched (further details unavailable)
    • Aggressive hiring plans have been made for the payments bank team. 3000+ staff
      planned to be hired till late 2017
    • Paytm has entered into a technology tie-up with US-based company FIS Global
      for the payments bank. Value of the five-year agreement is worth ~INR 150 Cr

o As a part of this deal, FIS will provide payment processing and banking
solutions including software, services and technology to Paytm

Investment of INR 1,200 Cr is planned for the first three years. Paytm is looking to set up 20 large branches, 200 smaller branches, and take on at least 1,000 agents in this period

One of the planned offerings is a cardless credit card backed by a bank, which could be connected to a customer’s Paytm wallet. This could be further used for transacting with Paytm's large online and offline merchant network