PayTM (One 97 Communications Ltd)

1. Whenever we pay a merchant using the QR code, Paytm get the details but when that money is transferred into the merchants Bank Account then even the bank gets the same details. Here the bank can use this data and then sell not only personal loans but all other types of products that the bank has to offer. How does PAYTM have an upper hand ?
   I do not think it is about upper hand, banks have always had the edge (in finance/tech) e.g UPI as well but see who UPI leader are. It is about how you process data and what is your focus. Even though I think when paytm app is used by merchant they have bank account in paytm payment bank as they provide some benefits to merchant having bank account with them. Bank have their hands full with usual business and this type of innovation need focus and high amount effort when you can earn high ROE without much effort why you take path where you might need to lose money in short term and do more hard work
2. The loans dispersed are not on PAYTM Balance Sheet, in case a default happens how does it impact Paytm and will it impact the bank and Paytm relation.
   It does not impact them directly, but they had to let go off their commission and it impacts their future disbursement with that specific lender/partner.
3. Personal Loans are risky and PAYTM does not have a track record in the lending business when we compare it with Banks and NBFC. How can we be sure that PAYTMs risk management is strong and when the credit cycles turn their default rate will remain low.
   Here, you need to check avg. tenure of personal loan and merchant loan. In Merchant loan, they deduct some amount daily so it is safer than personal loan. As per their presentation or concall – personal loan avg. tenure is around 1-1.5 years so paytm collects loan it disburses in last May’22 (fully!) so it quickly reflects in book of lending partner. You should watch Suresh Ganapathy’s interview (same analyst who had given target of 400 since IPO – multiple downgrades in between). He was vey skeptical about loan growth as it is always easy to disburse but hard to get it back. Postpaid is only for 90 days, if i remember correctly.

Thanks!