EkaLore writes about opportunities and challenges that Dynamic India faces as it seeks to leverage its unique cultural, geopolitical, and talent advantages.
The Indian Central Bank (RBI) had restricted Paytm from bringing on new commercial payment customers until it had completed applying for a new digital banking license. This action slows the ability of Paytm to gain market share and grow margins. A key concern of RBI was the ownership structure of Paytm.
A key concern for a Dynamic India going forward is intervention by Indian regulators in foreign direct investments where outside investors are limited. Indian enterprises working on competing in global markets will need investment, partners, and technologies from outside India to compete effectively. Protection of Indian markets may see protections against Indian enterprises in global markets.
One of Paytm’s largest shareholders (who had joined in the recent moves to restructure ownership of the enterprise) was Chinese Alibaba. After Paytm’s initial stock IPO in November 2021 (leaving Alibaba at a little over 6.21% of the shares), the equity value of the enterprise had taken a steep drop of up to 75%. Paytm’s good financial results (3 quarters ahead of their projected timeline for positive EBITDA) have sent the stock upwards. Alibaba has taken advantage of this situation to sell off its equity in Paytm at a profit in January and February 2023. After selling its remaining 3% of Paytm’s parent holding company, One97, estimates place Alibaba’s gains at about 10% on its investment.
Japanese Softbank and Chinese Ant Group are the remaining large foreign direct investors in Paytm (via One97). The Indian regulatory authorities have been concerned with foreign direct investors' interest in Paytm. The sell off by Alibaba (for about US$288M total) reduces regulatory concerns that have delayed Paytm’s application for a digital banking license.
Paytm’s market share (less than 15% of the Indian payments marketspace) is the smallest of the large three players; (PhonePE (46% of payments) is supported by Walmart; Google Pay (34% of payments) by Alphabet). New loan products also support Paytm’s financial margins above and beyond the contribution from the payments space. In the future, Paytm looks to expand its reach in mobile payments and focus on the commercial acceptance of its payment products.
You can find other articles about Dynamic India’s opportunities and challenges at www.ekalore.com/india-business
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