Podcast | Digging Deeper - The new chapters in the ever-expanding Paytm story

A story of ambition

The story of Paytm is one of ambition but even before we explore this latest episode, let us go back a little.

Paytm founder Vijay Shekhar Sharma has been depicted in the media occasionally as a little bit of a showboat, his reputation as the country's youngest billionaire on the Forbes 100 list no doubt contributing to it. People will remember Sharma controversially mouthing expletives and dancing in 2017 at the annual Paytm event.

After having made the most of cashless transactions post demonetisation, he had shouted from the stage: "Yeh hai Paytm... Jo humare sath nahin woh royenge." He had also mocked other startups to claim that Paytm had done in one year what others could not do in 10. He even shouted a North Indian expletive far too unparliamentary for us to repeat, but we are digressing.

There was also the infamous Cobrapost expose where Paytm's senior VP was recorded making a statement that the firm was asked to share user data with the Prime Minister's Office in the aftermath of heavy stone-pelting in Kashmir. Though Paytm, of course, retorted categorically that "there is no truth in the sensational headlines of a video doing the rounds."

But regardless of the niggling controversies, Paytm, as has been well documented, became the single largest beneficiary of demonetisation after 86 percent of the country's currency notes went out of circulation. Paytm userbase during this period hit the staggering figure of 160 million.

Paytm also became the first payment app to cross over 100 million downloads in 2017. Sharma also became the youngest Indian billionaire in the Forbes list with a net worth of $1.3 billion and growing.

Not surprisingly, he went on to stake a claim on a prized address in the posh Lutyens' Delhi. A 6,000 sq ft bungalow in central Delhi’s Golf Links valued at Rs 82 crore ($12.7-million) has supposedly caught the attention of Sharma but we must now return to where his story is unspooling now.

A sudden twist

Many observers were left reeling when news broke that Paytm founder Vijay Shekhar Sharma's close aide and one of his oldest employees, Sonia Dhawan, was arrested on the charges of blackmailing him. Many controversies have also swirled around this development with allegations flying to and fro.

Sonia's lawyer has claimed in her defence that the promoters of Paytm were pressurising her to sell her stake in the company and that she has been framed in a dark conspiracy.

Who has been blackmailing whom and why... this is still an unfolding story but Sonia Dhawan's lawyer claims that even she and her husband Rupak Jain had received an extortion call for Rs 5 crore on September 22.

A source close to Sonia told MoneyControl that she was promoted to the position of the Vice President (corporate communications) of Paytm just a month ago and was associated with the company for almost 10 years. There seems to be no logical reasoning, it is claimed, why she would resort to blackmailing after having started off as a secretary and then going on to head the corporate communications of the company.

However, as claims go, Sonia, her husband Roopak Jain, and another Paytm employee Devendra Kumar were allegedly involved in the blackmailing. The fourth accused, Rohit Chomal, is a resident of Kolkata and had allegedly made the extortion call to Sharma's brother Ajay Shekhar.

The court has rejected bail to the three accused who have now been sent to judicial custody.

At the heart of this story is data around which Sonia Dhawan allegedly hatched a plan to extort Rs 20 crore from the Paytm boss. She supposedly threatened to leak his stolen personal data after stealing it from Sharma's laptop, phone, and office desktop.

Ajay Shekhar Sharma, the Senior Vice President at Paytm and brother of Vijay Shekhar Sharma, told MoneyControl that it all started around 11 am on September 20 when Vijay received a call from a Thailand-based number while he was in Japan.

Ajay said, "The person claimed he had my brother's personal data and demanded Rs 20 crore for not leaking it. My brother avoided the call even as the other person called four-five times. At the end of it, my brother suggested that he should speak to me since he was busy."

Rohit Chomal then had allegedly made the extortion call to  Ajay and had threatened to leak "personal data that included photos and personal financial details, if he didn't pay up the money through Hawala," to avoid any money trail.

As reported by MoneyControl and Business Today, on Sharma's insistence that he would transact online, the accused shared a bank account number that was held by a company named Apnapan Tieup.

A sum of Rs 67 was transferred in the bank account of the accused to make sure the transaction was happening and later the amount of Rs 2 lakh was transferred.

Later, strangely, Chomal blurted out the names of Sonia, Jain, and Kumar, stating that they were the people behind the plot.

Post the registration of an FIR, the accused were booked under the Indian Penal Code sections 381 (theft by clerk or servant of property in possession of master), 384 (extortion), 386 (extortion by putting a person in fear of death or grievous hurt), 420 (cheating), 408 (Criminal breach of trust by clerk or servant) and 120 B (party to a criminal conspiracy). Charges under the provisions of the Information Technology Act have also been pressed against the accused, the police said.

Interestingly, in the middle of all this, the e-wallet major has said that all its consumer data are protected with the "highest and most impenetrable levels of security."

Paytm said in a statement, "This is a case of personal data theft of Vijay Shekhar Sharma, where three arrests were made yesterday. At this point, the law enforcement authorities are investigating this matter and we would like to respect the police investigation, and not comment further until the results of such investigations are known."

The central figure

It goes without saying that Paytm has been on a roller coaster ride through the years and Sharma could well be a Chetan Bhagat protagonist.

A boy from Aligarh with Hindi medium schooling and days of struggle, who rises to touch the tip of the start-up pyramid, and even though there have been naysayers and sceptics questioning the company's longevity, brand dignity and sustainability, it has not stopped the company from growing in multiple directions.

As MoneyControl reported earlier, One97 Communications, which owns and operates Paytm, on Monday said it has launched a QR based smartphone payment service in Japan called PayPay. The service has been launched in collaboration with SoftBank Corp and Yahoo Japan Corporation and will allow users to store money from a bank account in their PayPay wallet and make payments with it.

Madhur Deora, chief financial officer and senior vice president, Paytm said, "PayPay was developed with teams from three different countries working together, it is a true testimony for us and our industry-leading solutions that can be easily ported to suit the needs of any country or market."

The announcement marks Paytm's entry into the Japanese market. Paytm's first international foray happened last year with the launch of its services in Canada. Users in Canada pay for utilities such as phone, cable, internet, electricity and water bills through the Paytm app.

PayPay aims to promote the use of cashless payment in Japan and provide services to consumers and affiliated stores. For the first three years, PayPay has said, it will not charge any fee from sellers for user scan type settlement to promote the usage. The company will also be offering cashbacks to the tune of 500 yen to each customer downloading the application.

In a statement issued earlier this year, Softbank had said that cash still was the mainstream payment methodology in Japan with cashless payment remaining at just 20 percent. It added that the Japanese government was taking measures to raise the cashless payment ratio to 40 percent by 2025, with a long-term goal of 80 percent." Paytm is already a market leader in payments in India, and claims to have over 300 million customers and 8 million merchants so far.

The company, which has Softbank on its board, last raised $300 million from Warren Buffett's Berkshire Hathaway Inc in September.

The basket gets bigger

In another development, Paytm Mall is likely to buy a majority stake in BigBasket to enter the online grocery space, as the company has been reportedly looking for a grocery e-tailer to team up with ever since rumours got out that Walmart wanted an e-commerce partner in India, according to a report on Business Standard.

What seemed to have caught Paytm's attention is Chinese e-commerce giant and Paytm backer Alibaba, which had invested $200 million in BigBasket in February.

The Business Standard report suggests that negotiations are on the fast track, though Paytm has been unable to decide on BigBasket's valuation.

Sources told Business Standard, "BigBasket wanted a seat on the board of Paytm Mall. It also wants the company to be valued at a premium."

Another source told the newspaper, "At the moment Flipkart and Amazon own almost 95 percent of the country’s e-commerce space. If Paytm Mall, or rather Alibaba, wants to elbow its way in, it needs a strong platform. BigBasket is one such entity, more importantly, it is one of the few that deals with fresh produce."

In the fray is also Walmart-owned Flipkart that had also set aside around $400 million for the online grocery segment.

Many frontiers

Wealth creation is a tricky territory in India where the gap between the very rich and the very poor seems to expand exponentially, but in Paytm's rule book, this process can be democratised.

Vijay Shekhar Sharma said recently that access to wealth creation opportunities till today had been limited to a select few. With Paytm Money, the company wants to democratise and bring mutual fund investments to millions of Indians.

Earlier this year, the company received the approval from the Securities and Exchange Board of India (SEBI) to act as an investment adviser. It aims to provide both investment advisory and execution services.

The company has also stated that customers will be able to buy mutual funds directly from their bank accounts. They would not need to store money in the Paytm wallet.

Startups such as FundsIndia also sell mutual funds on their platform. The company has raised around $11 million from Inventus Capital, Foundation Capital and Faering Capital. Other companies in this space include names like Sqqrl and Coin by Zerodha.

Paytm entered the mutual fund market by launching its app for mutual fund investments on Tuesday and now aims to sell mutual funds to around 25 million people in the next three to five years, according to a senior executive.

Pravin Jadhav, whole-time director of Paytm Money told MoneyControl over a telephonic interaction, "About 50 million investors will be invested in mutual funds by the next three to five years. In that 50 million, we want to have a majority share, so around 20-25 million people."

The company is offering systematic investment plans (SIPs) for as low as Rs 100 in some of the schemes as it targets individual investors sitting in Tier 2 and Tier 3 cities.

It has partnered with 25 asset management companies to offer direct plans of mutual funds.

The company claims that 850,000 users have already registered on the platform. According to Jadhav, out of this, 65 percent of the people are from beyond the top 15 cities of the country.

According to Business Today, One97 Communications has committed an investment of $10 million in Paytm Money which it plans to invest by the end of the financial year 2019.

This money is being invested in technology, development of products, design, engineering and setting up the entire function.

As is already known, One97 Communications has added Warren Buffet's Berkshire Hathaway on its cap table. The size of the deal is to be expected to be in the range of $300-350 million and Berkshire has joined the list of key shareholders in Paytm, including names like Ant Financial, SoftBank, Alibaba, and SAIF Partners.

So as you can see, this story continues to develop across a path that is as interesting as an unputdownable bestseller that continues to profit from our curiosity and promises many sequels in the future.