In December 2014, Vijay Shekhar Sharma said a polite no to SoftBank. The Japanese telecom and Internet behemoth wanted to put money in Sharma’s One97 Communications. An amount so big it would have become the single-largest shareholder.
Sharma really needed money then. One97’s digital wallets, under the Paytm brand, were experiencing sustained buoyancy. Its online market place needed to ramp up. It wanted to grow in financial services.
Yet Sharma said no. “SoftBank would have become the single-largest shareholder, something I was not comfortable with.”
So it should come as a surprise that he agreed to give 40% stake to China’s Alibaba group in return for $680 million in 2015, making it the single-largest shareholder in One97.
Or, maybe it should come as no surprise. Not if you know the turning point in Sharma’s thinking and ambition. That came as he sat in the audience, listening to Alibaba founder Jack Ma in October 2011 in Hong Kong.
WIND BENEATH HIS WINGS
Back then, Jack Ma talked about doubling Alibaba’s business on its way to becoming the world’s largest ecommerce company, bigger than Amazon. Sharma was completely taken in by the scale of Jack Ma’s ambition. Now, he derives strength from it.
Last year Paytm doubled its business to $4 billion, and plans to double it again in 2016 by building a bouquet across mobile wallets, online marketplace, and financial services. It already has 100,000 merchants on its marketplace, processing 75 million orders a month. It has 120 million wallets, and claims that they are involved in more transactions than credit cards.
When Sharma said no to SoftBank, the Japanese company went ahead and invested in Paytm’s rival Snapdeal. But Mark Schwartz, chairman of Goldman Sachs Asia-Pacific, who was present when Sharma met SoftBank’s Nikesh Arora, later wrote to Jack Ma and got Sharma a meeting with him.
Sharma met Jack Ma in Hangzhou in China — a meeting that was meant to end in half an hour but lasted nearly four times that. Sharma not only got money but also a business tip. Alibaba had built the wallet business on top of its ecommerce marketplaces TMall and Taobao.
“Jack Ma can do wonders, and he can make others do magic,” says Sharma. If he is right, it won’t be the first dash of magic in his career.
BOY TO MAN
A decade ago Sharma thought twice before spending Rs 10. This was when his partners left him bankrupt. He moved into a small hostel at Delhi’s Kashmiri Gate, often skipped meals, and walked miles to save money.
He came from Harduaganj, a small town near Aligarh, in Uttar Pradesh, where his father taught biology. Sharma went to a Hindi-medium school, where many children would go barefoot because they could not afford shoes. After Class XII, he spent a year preparing for engineering exams and learning English, and made it to the Delhi College of Engineering.
Turning entrepreneur after college, he had dismal to moderate successes with several technology ventures, until 2012 redefined his path. That was the year Sharma’s digital wallet business of recharges and bill payments gathered steam. Two years later, Paytm was doing more transactions every day than IRCTC, the Indian Railway’s ticketing site.
Paytm had a small marketplace business, which found wings as the wallets grew in popularity (you can pause here to go back to Jack Ma’s tip). “We doubled the number of sellers on our marketplace,” says Sharma. Though the platform allows payments through credit and debit cards and cash-on-delivery, the preferred mode of payment is the wallet.
Making banks think again
Other online market places such as Flipkart and Snapdeal are way ahead of Paytm in the total value of transactions as well as valuation. But Sharma hopes to catch up. His wallet has brought him so far; he is counting on the payments bank licence, which came through in August, to take him the rest of the way.
A payments bank can do some of what a full bank does, like deposits and payments, but cannot give loans. But Paytm is the only e-commerce outfit to have the licence. And that takes Sharma a vital step closer to emulating Jack Ma. “We learnt banking from Alibaba. It manages $112 billion of deposits in money market funds and is a branchless bank,” says Sharma.
Does it worry him that as he gets into banking, banks are getting into digital wallets, including the big gorilla, the State Bank of India? Instead of worrying over that, Sharma wants to take the battle to the bank’s camp.
The Paytm bank will be a bank with a difference. The wallet will be integrated with the bank account. The wallet balance will become the bank balance and earn interest. Next, Paytm will get into bed with the enemy. “We will issue credit cards and debit cards, which can be used at any ATM... Paytm will be used as any other bank account. For things like net banking you will need your phone number and Paytm password.”