PayTM (One 97 Communications Ltd)

Often, what a company doesn’t do tells a lot about it than what it says it does. So here are a few such things from the PayTM concall:

• We do not offer loans for merchants who have not been on our platform using devices consistently at least for a period of six months.
• We don’t intend to have a balance sheet. We are a technology company… we would love to work with the lenders and the wisdom that they have of doing credit over so many years…if they feel comfortable doing more, we would do more. If they feel comfortable to do less, we will do less.
• Why not rope in a different set of partners for postpaid who are willing to take higher risk? Answer: I don’t think as a strategy, we want to arbitrage and move to a partner who could technically say, “Hey, I’m happy to take this risk and let’s do business with – you can do business with me.” Our belief here is that we would love to build a business which on an overall basis is aligned to the way the regulatory thinking and the lenders are thinking. So, if there is a concern either regulatory or otherwise, we would like to play with that and make sure that unless and until the overall macro environment and regulatory environment is positive, we are not necessarily going ahead and building this business at a scale that we were building earlier.
• Don’t want to give PAT guidance though we expect to be PAT positive in near future.
• Will have only a moderate expansion of the sales force going ahead… we don’t necessarily need to add more people to grow.
• We can move a customer from one lending partner to another. There is no contractual restriction, but we do not do that unless the other lender is okay. We do not necessarily play on contracts; it is in the spirit of partnership.

I must say I agree with all of the above as a sensible business strategy.

Finally, a key point that is often missed (or underrated), which I have written above earlier also: Why anyone will take loan through Paytm app when they already have pre-approved lines of credit from their banks?

People are not necessarily aware or that much used to using their bank’s platform or lending partner platform that actively versus how they’re used to using Paytm platform. The accessibility of the app makes all the difference, our product efficiency is completely digital and very instant. What we are changing is availability. 10 crore people are able to see the icon to get credit.

(Disc.: Holding)