“Paytm Bank which operates banking business, has a very minimalistic impact on a short, mid-term basis because our business model is led by payments. On behalf of Paytm Bank, I can say that we are in the process of completing the necessary inputs that have been suggested within the timeline,” says Vijay Shekhar Sharma, Founder & CEO, Paytm
What is the RBI action all about? What is it going to mean for Paytm? We have certainly seen the stock today close down more than 12% in the red, almost Rs 95 a share, today the stock went home at Rs 680 a piece.
There is no doubt that as Paytm Bank (I am also the part-time non-executive chairman of the Paytm Bank), it is an important thing for us to get an update from RBI on various systems and processes where they want us to take a lot of actions and system updates.
We have the task cut out for us. We have things that have to be sorted out and then we have to get an IT audit done and submit the report to the RBI. They have publicly announced it and today we cannot onboard a wallet customer or a savings account or a current account customer in Paytm Payment Bank till the time this embargo is removed from us.
Today as we speak, we can continue to onboard other banks’ customers linked UPI bank accounts on Paytm Bank UPI system and Paytm app which in turn uses Paytm Bank. UPI system means that for Paytm continuous incremental customer acquisition using UPI will continue. So it is an important thing for us to get an RBI update of this kind. Within the prescribed time, we will definitely be able to complete the job and hopefully submit the report to RBI as suggested.
RBI had said, “material supervisory concerns.” What are these material supervisory concerns? The reports are coming out. They are defunct accounts, KYC norms have not been followed properly. These are some of the two charges. Third one, of course, has to do with data sharing with Chinese entities.
First of all, there is absolutely no observation, comment or input related to any data sharing or data access issue whatsoever. Forget about adding a Chinese flavour to it. This is extremely sensational, rubbish and illogical of somebody to take this out as if it is an observation when factually there is no such reference, near or far, that could be even interpreted by any stretch of imagination, to that kind of news.
The systems are in India. The access to the systems is governed by the IT rules and regulations of India and in turn further stringently and strictly according to what RBI guidelines say. The Paytm Bank has not ever in the past or now at any moment, given any unauthorised access to any bank system to any non-authorised person, forget to a foreign national.
Paytm Bank has its own board, management which is completely Indian. So this is not just sensational and rubbish, this is also surprising to why this kind of news got made out of what confirmation or conversation that somebody would have.
The payment bank is a joint venture between Paytm, you, China’s Alibaba Group Holdings affiliate Jack Ma’s group company and these are as per the DRHP, this is as per your exchange filings. So are you saying a joint venture in which there are Chinese partners, are not getting any of the data, none of the servers are in China, all of the data is stored within Indian shores?
Yes and Paytm bank shareholders are no other entities but Paytm which is an Indian listed entity and myself, absolutely no one else. So I am sorry to say there is no foreign national beyond Paytm which is incidentally because it is majority owned by foreigners and so equity ownership is accounted for in the foreign bucket of ownership which in turn is 49%. There is no other foreign shareholder whatsoever of the Paytm Bank. It is Paytm and individually like you said, my personal equity in the bank.
What are these “material supervisory concerns”? RBI must have told you that. The stock has taken it on the chin. It went down nearly 13% in the red, it is trading at Rs 680 a share. Retail shareholders will want to know. They are waiting for good news since the IPO. The stock price is down over 65% from peak?
First and foremost, the stock price is of Paytm and not Paytm Bank. I just want to clarify that Paytm Bank is a private entity, not listed. And this information related to Paytm Bank is totally false.
As far as the Paytm stock price is concerned, it is the impact of Paytm Bank’s embargo of adding new customers on Paytm business model. We have filed to the stock exchanges the impact analysis done by the management and we believe that it could not have very large material impact incidentally because it’s not just UPI customer on-boarding for which Paytm continues to operate, at the same time, previous customers continue to operate.
Paytm’s business is payment processing for merchants and various other commerce services. The core business of Paytm is not banking. Paytm Payment Bank does banking and we have filed a stock exchange response to the potential impact.
Would you like to tell your retail shareholders what the impact could be? Also, when are you expecting the curbs to be lifted? For example, HDFC Bank no longer has those curbs. It was a rather long journey.
First of all to the OC Paytm shareholders, our understanding is that Paytm Bank which operates banking business, clearly has very minimalistic impact on a short, mid-term basis because our business model is led by payments.
When it comes to the shareholders or the stock price or the length of the embargo, on behalf of Paytm Bank I can say that we are in the process of completing the necessary inputs that have been suggested within timeline and that we will be able to submit post completing the process of an IT auditor’s report within timeline. RBI has prescribed a timeline and we will be able to abide by that. Considering the communication between regulator and the bank is confidential in nature, I can only say as much that the timeline provided is adequate and the items that we need are very logically doable within that timeline.
Any larger message which is there for the retail shareholders? They have lost a lot of money since the IPO.
No promoter, no CEO, no management will be happy seeing shareholders not being able to recoup their losses in a short span of time. I am sure people understand that there are various macro plays involved and not just the company’s performance here. As far as the company is concerned, our quarterly numbers are very much aligned to the business model that we have talked about where we are able to start and have started monetising our customer base, consumer and merchant both.
The payment business incidentally quarter-on-quarter, year-on-year grew more margin and scale and these businesses we believe are going to continue to grow for the next many years to come. Digitisation, digital payment is a journey that has begun in this country. In fact, we had a very long analyst call where many interesting questions came about where I was able to explain to many analysts that our business model helps India achieve digitisation agenda.
Our company’s purpose has very much aligned to the revenue models that we foresee the payment company to get where the customers that are acquired using payments can get monetised on commerce and financial services. I am very happy to tell you that in our credit and financial services business, we have partnered with many large NBFCs and large banks in different product formats and the revenues and the impact of those partnerships is clearly visible in our quarterly results.
On behalf of management I can continue to say that we are very clear of the responsibility on our shoulders to make our company reach a sizable scale and platform and will definitely earn it at all costs. We are continuously focused on that as an important near term target. Incidentally, the company has incredible growth upside ahead and we would be able to drive lots of monetisation opportunities in due course. Obviously, these things are forward looking statements. I cannot quantify or give more than that we are very hopeful things would happen that way.
RBI has banned onboarding new customers not for Paytm, but the Paytm Payment Bank in which you and Paytm are shareholders. How will you reward your retail shareholders?
There is no other better reward than a good surprise. How else? This is a company where the management is focussed on key KPIs of business – growth, revenue, profitability and we are completely focussed on growth, revenue and profitability.
Profitability in how much time is the multibillion dollar question!
Yes, I mean if I was private, I would have talked a lot more but because we are a public company, I am cognisant of the fact that I should not talk about forward looking numbers and projections unless we have declared to the stock exchange. I am sorry to say I cannot say more than that that we are clearly, completely focussed on these parameters. One interesting way to look at it could be that we see analyst reports and they are a lot more pessimistic than what we see in execution that we are going ahead. Obviously, we are also hopeful that analysts when they look at quarter-on-quarter numbers they will be able to see the pattern and upgrade those models.
Why does the China angle keep coming up time and again? How are you as the founder manage this? Or does it not need managing?
The best thing I can say is that we are a public company in India. Every relationship with any stakeholder is public domain, it is out there. We are a completely Indian management, a completely Indian-run business. Everything is publicly visible.
Our business is a technology business built in India and we are very proud of it. We are the business partner in SoftBank with whom we also have a business in Japan PayPay. It was built on Indian technology and I can assure you that Indian technology’s capability is bright, rising and shining in Japan also.
As an Indian I am very proud that we went to Japan and built a technology platform for the Japanese market and it is now one of the most dominating payment platforms and probably the largest mobile payment platform. All this is not because we are Indians in heart and body and soul, we are Indians in our minds and want to take India’s flag forward,