Strategic Analysis of paytm

Presented to :
Prof. R. Kannan

Group 9
Kshitij Mundhada A038
Prateek Nanda A039
Sudarshan Raghunathan A045
Sahil Sharma A049
Jaspartap Singh A053
Daksh Tripathi A064
 OVERVIEW

Industry Profile Company Profile Strategies adopted Financials

Strategic
Recommendations Potential Risks
Frameworks
Porters five forces
Competitive Profiling Matrix
IE Matrix
Strategic Position & Action Evaluation
matrix (SPACE) Matrix
Quantitative Strategic Planning
Matrix (QSPM)
Ansoffs Matrix
 Industry Profile
Digital Payments E-Commerce Payments Bank
Expected to Grow at a Projected to reach $100 New model of Banks
CAGR of 30% Billion by 2020 Conceptualized by RBI

Large players like HDFC, IndiaMART started Cannot Issue loans and
SBI, Axis Bank, Reliance, operation in 1996 in B2B credit cards
Tata Teleservices model
Currently Airtel Payments
UPI Based Apps (BHIM, Earlier Models used Credit Banks and Paytm have
Bank Apps) Card payments started operations

Digital India Movement, Flipkart launched in 2007 11 entities have received

PMJDY offered Cash on Delivery approvals from RBI

Market leaders: Flipkart and

Amazon

Deloitte Report on e-commerce in India

 Company Profile & Milestones
Paytm is an Indian payment and e-commerce company based out of Delhi NCR,
India. Launched in 2009, it is the consumer brand of parent One97 Communications.

It currently provides payment, e-commerce, ticket booking, hotel room booking and
banking services.

Launched Plan to Expanded

Recharge Hotel Paytm
as Added e- separate its payment
service with aggregation payments
enterprise commerce ecommerce services to
a wallet and ticket bank Ltd.
payment market from digital overseas
license, booking Launched,
service, place, 2014 payments, market,
2013 added, 2015 2017
2009 2016 2017

Customer base of 150 million

75 million app downloads
Investors include Alibaba, Alipay Singapore, SAIF III Mauritius and SAIF Partners
India
Alibaba became the largest investor (40%) at a valuation of $4.8 Billion

http://www.firstpost.com/business/paytm-valued-4-8-bn-vijay-shekhar-sharmas-
journey-from-aligarh-to-alibaba-3321306.html
Wallet Partners
 Product Portfolio

Bill Payments

Train, Bus Flight Bookings

Hotel Bookings

Metro Card Recharge

Mobile Recharge

Challans

Broadband

DTH
 Two-sided e-commerce business model

Sellers Buyers

Seller Side Platform Subsidy side

Platform- Product or services that bring together group of users in 2 sided networks
They provide infrastructure and rules that facilitate the two groups transactions

Revenues and costs are on both the sides

 strategies of Paytm(2009)
Inception of Paytm (Move To Services From VAS, 2009)

The game plan

Partnered with
Payments could be Started discussions
Launched Paytm as a Aggregator of mobile vendors like
made through voice on entering mobile
payment platform payment systems HomeShop 18, Ferns
and website commerce
and petals, etc

Business expansion strategy

Funded by SAIF
Focus on B2B
partners and Silicon
operations
Valley Bank
 strategies of Paytm(2010)
Early years of Paytm(Planning to leave telecom services, 2010-2011)

The game plan

Allowed mobile
Allowed payments prepaid and DTH Recharges done Grew by 20 times
Moved to Paytm.com
through IVR, SMS, recharges, movie worth Rs 1 Lakh per since moving to new
domain
WAP and website ticketing, and mobile day domain
shopping

Business expansion strategy

Offered a free one

Focus shifted from month subscription
Paytm advertised
B2B to B2C of Jokes SMS Pack
on Medianama on every recharge of
Services
Rs.100 or more
 strategies of Paytm(2011)

Early years of Paytm(The payment gateway, 2010-2011)

The game plan

It also offers a 247

Offered recharge Offered recharge for Plan to launch
customer support
facility for all major all major telecom Paytm mobile
and a mobile web
DTH providers application
site

Business expansion strategy

Offered a free one

Focus shifted from month subscription
Paytm advertised
B2B to B2C of Jokes SMS Pack
on Medianama on every recharge of
Services
Rs.100 or more
 strategies of Paytm(2012)

Expansion of Paytm services(Paytm payments, 2012)

The game plan

Increased Included 60+ Added recharges

Officially launched Launched tickets
registered users clients and for toll cards for Plan to offer
the payment booking at
to 1.6 mn; 2.8mn collaborated 43 Gurgaon digital goods
gateway tickets.paytm.com
unique visitors banks Expressway

Business expansion strategy

Charged 6-9%
Charged 3-4% per
commission per
transaction
ticked booked
 strategies of Paytm(2013)
Upgrading Paytm services(2013)

The game plan

Obtained the
Started offering Selling the digital
license to offer Launched tickets
Live bus tracking IMPS for goods under the Opened its online
customers semi booking at
added merchant brand name marketplace
closed prepaid tickets.paytm.com
payments Paytm
wallets

Business expansion strategy

Gain advertising fee

from vendors for Acquired Plustxt
displaying their messenger for $2mn
coupons
 strategies of Paytm(2014)

Addition of Plustxt 100000 product; 250 300000

messenger to the app merchants transactions/day
Growth strategy
Cashback offers on select
products
To reach Rs 2000 Cr revenue by
end of year
Expansion planned in Canada
Exclusively partnered with Uber and Singapore
 strategies of Paytm(2015)

Target of 1 mn transactions in a day

Plans to open 50000 retail stores Invested in Jugnoo
User base increased to 100mn with 75mn and Little($50 mn )
GMV transactions per month and Loginext ($10mn )
and Next.in ($2mn )

QR code based payments system

Added Transfer cash to Bank accounts
Functionality BCCI
sponsorship
(Rs 203.28
Added movie and entertainment ticket booking on Raised $ 575mn Cr )
Paytm from Alibaba and
Tie ups Partnered with lendingkart to offer loans to seller Rata Tata invested
undisclosed
amount
 Pushing strategies of Paytm(2016)
user to
update
KYC to Entered Invested 350 cr in
Partnership increase Multi Payments Bank
with Bank of limit Channel
Borrowed 300 cr from
Maharashtra retail ICICI bank
model

DELHI Partnered
METRO with Alipay
Partnered with
and Stripe
Delhi Metro Tie up with Acquired Shifu and
PVR ,Inox EduKart
,Cinnepolis
 strategies of Paytm(2016-)
Paytm growth 2016-(Post- demonetization)

The game plan

Started toll free

Expanded its Paytm gets
Over 200 mn Will provide wallet number for money Current company
operations in payments bank
users on Paytm insurance transaction on valuation $5 bn
Canada license from RBI
feature phones

Business expansion strategy

Acquired Shopsity to Paytm to invest Rs

bolster offline seller 600 Cr to acquire
services 10mn merchants
 Google interest score over time
120

Paytm MobiKwik FreeCharge Citrus payu

100

80

60

40

20

0
9/30/2012 10/31/2012 11/30/2012 12/31/2012 1/31/2013 2/28/2013
 FUNDING HISTORY
Since Paytm was founded in 2010, it has participated in 6 rounds of funding. In total, Paytm has
raised $537.5 Million. Paytm's last funding round was on Mar 02, 2017 for a total of $200 Million

Amount (in Mn$) Date Type Amount Investors

Alibaba Group Holding

Mar, 2017 Equity $200M
250 SAIF Partners

200 Feb, 2017 Equity $32.5M ---

MediaTek
150 Aug, 2016 Equity $60M
Amount
232.5
200
100 Mar, 2016 Debt $45M ICICI Bank

105
50 Apr, 2015 Equity $200M ---

0
Mar, 2015 Equity Undisclosed Ratan Tata
2015 2016 2017
 REVENUE & SHAREHOLDING PATTERN
Revenue (Cr. INR) Shareholding Pattern
900 830

800 Alipay Singapore E-

Commerce P Ltd
700
10% Mr. Vijay Shekhar
600 8% 32% Sharma
9% SAIF III Mauritius Co
500
Lyd
400 324 Revenue (Cr. INR)
20% Alibaba.com Singapore
21% E commerce Co P Ltd
300 223
177 SAIF Partners India P
200 197 Ltd
119 230
100 others

0
2010 2011 2012 2013 2014 2015 2016

2016 saw a major boost in revenue due to increasing number of e-wallet users and e-commerce
customer
Alibaba with its expertise in e-commerce business is the major shareholder of Paytm
 WORKING CAPITAL & EXPENSES
WC( Cr.INR) Expenses( Cr.INR)
300 279 800
685
235 700
250 229
600
200 174 500

150 400
WC( Cr.INR) Expenses( Cr.INR)
300 193
100
67 173
200 157
44 122
50 93
100

0 0
2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015

Increasing Working Capital till 2015 due to consistent infusion of capital by investors
However, Paytm took a loan of 300 Cr. INR from ICICI bank in 2016 for launching the Payment Banks
business
 EXPENSE BREAK-UP & RoE
600
RoE
403 EXPENSE
40
500 BREAKUP 21
20
20 12 10
1
400
0
2010 2011 2012 2013 2014 2015
Advertisement
-20
300
Employee related
D&A -40 RoE
200
-60
31 34
16 22 28
100 -80
118 -96
59 64 80
41 47 -100
20 23 24 23 18 20
0
2010 2011 2012 2013 2014 2015 -120

Paytm advertisement expenses increased 12 times in 2015

Launch of E-commerce business saw a huge dip in RoE
 EPS & NET PROFIT MARGIN
EPS Margin(%)
40 50
22 25
14 12 19 14
20 6 13
1 1
0 0
2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 2016
-20

-40 -50

-60 EPS Margin(%)

-114
-80 -100 -187

-100

-120 -137
-150

-140

-160 -200

EPS and Net Profit Margin both declined after 2013 due to launch of e-commerce business
A net loss of 1548 Cr. INR in 2016
Porters 5 Forces Model of
Competitive Rivalry: High
Paytms e-commerce
Number of competitors (High)
division
Quality differences (At Par)
Switching costs (Low)
Customer loyalty (Moderate)

Suppliers(Sellers,forward integration Threat of a New Entrant: High

providers) Power: Moderate Time and Cost of Entry (High)
Number of suppliers (High)
Porters 5 Forces Barriers to Entry (Low)
Uniqueness of service (Low) Model of
Sellers can choose to increase prices Though barriers to entry are low but the Cost of a
E-Commerce brand development
and logistics providers can
like Paytm is quite high
increase costs too

Buyer Power: High Threat of Substitution: Moderate

Number of customers (High) Substitute performance (High)
Size of each order (Low) Cost of Change (Low)
Price sensitivity (Moderate)
Ability to substitute (High)
 Competitive Profile matrix e-commerce
Competitive Profile Matrix (CPM)
Paytm Flipkart Amazon Snapdeal
Critical Success Factors Weight Rating Score Rating Score Rating Score Rating Score
Market Share 0.16 1 0.16 4 0.64 3 0.48 2 0.32

Delivery Time 0.13 1 0.13 3 0.40 4 0.54 2 0.27

Customer Loyalty 0.11 1 0.11 4 0.43 3 0.32 2 0.21

Advertising 0.09 1 0.09 4 0.36 3 0.27 3 0.27

Customer Service 0.09 1 0.09 4 0.36 3 0.27 2 0.18

Brand Reputation 0.09 1 0.09 4 0.36 3 0.27 2 0.18

Ease of Replacement 0.08 1 0.08 3 0.24 4 0.32 2 0.16

Market Penetration 0.07 1 0.07 3 0.21 4 0.29 2 0.14
User Experience 0.07 1 0.07 4 0.29 2 0.14 3 0.21
Price Competitiveness 0.06 4 0.25 1 0.06 3 0.19 2 0.13

Payment 0.04 2 0.09 3 0.13 4 0.18 1 0.04

Totals 1.00 1.23 3.48 3.26 2.12

Porters 5 Forces Model
Competitive Rivalry: High
of Paytms payment
Number of competitors (High)
services
Quality differences (At Par)
Switching costs (Low)
Customer loyalty (Moderate)

Supplier Power: Low Threat of a New Entrant: High

Number of suppliers (Low) Time and Cost of Entry (High)
Uniqueness of service (Low) Porters 5 Forces Specialist Knowledge (Easily Accessible)
Model of Technologies Protection (Low- Reverse
Suppliers would be the provider of Engineering)
payment
technological solutions which are services Barriers to Entry (High)
mostly in house

Buyer Power: High Threat of Substitution: High

Number of customers (High) Substitute performance (High)
Size of each order; ticket size (Low) Cost of Change (Low)
Ability to substitute (Strong)
 Competitive Profile matrix Payments
Competitive Profile Matrix (CPM)
Paytm Freecharge PayU Mobikwik

Critical Success Factors Weight Rating Score Rating Score Rating Score Rating Score

Market Share 0.20 4 0.80 3 0.60 2 0.40 1 0.20

Sales Promotions
0.15 4 0.60 3 0.45 1 0.15 2 0.30
(cashback, loyalty points)
Advertising 0.11 4 0.44 3 0.33 1 0.11 2 0.22
Market Penetration 0.11 4 0.44 3 0.33 1 0.11 2 0.22
Ease of payment 0.10 3 0.30 4 0.40 1 0.10 2 0.20
Merchant Acceptance 0.08 4 0.32 3 0.24 1 0.08 2 0.16
User acceptance 0.08 4 0.32 3 0.24 1 0.08 2 0.16
Customer Loyalty 0.08 4 0.32 3 0.24 1 0.08 2 0.16
Brand Reputation 0.06 4 0.24 3 0.18 1 0.06 2 0.12
Customer Service 0.03 4 0.12 1 0.03 2 0.06 3 0.09
Totals 1.00 3.90 3.04 1.23 1.83
 IE Matrix
The Internal-External (IE) matrix is a strategic management tool used to analyse working conditions and
strategic position of a business

Internal Factor Evaluation (IFE) matrix is a strategic management tool for auditing or evaluating major
strengths and weaknesses in functional areas of a business.

The EFE matrix is a tool to visualize and prioritize the opportunities and threats that a business is facing.

Factors Weights Rating Multiply Sum

Grow and Build Strategy

Intensive and aggressive tactical strategies. Focus on market penetration, market
development, and product development

Hold and Maintain Strategy

Focus on market penetration and product development.

Harvest or Exit Strategy

Aggressive cost management is a way to play the end game.
 IFE Matrix Strengths and Weaknesses
Strengths and Weaknesses Wts Ratings Score
The main investor Alibaba understand the dynamics of the e commerce business and will understand
0.15 4 0.60
the high capital infusion needed
Recently launched UPI enabled system and IMPS for instant fund transfer between banks using
0.12 3 0.36
mobile phones
High attrition of the top brass of the company 0.12 1 0.12
In just one year, offline transactions have overtaken online transactions 0.10 3 0.30
Largest mobile payment platform 0.10 4 0.40
Aggressive plans to grow merchant network (From current 450 districts to 650 districts target) 0.07 4 0.28
Paytm to invest Rs 600 Cr to build & take QR payment solutions to sellers 0.07 3 0.21
Faliure rates went up during demonetisation 0.07 1 0.07
Technical expertise in handling frauds in payment banks. Have a dedicated team in Ontario to deal
0.05 4 0.20
with frauds
Compatible with all platforms eg: Android, iOS, Windows 0.05 3 0.15
Launch of payment banks 0.05 3 0.15
Internet penetration still not significant 0.05 2 0.10
2.94
TOTAL IFE WEIGHTED SCORE: 2.94
 EFE Matrix opportunities and threats
Opportunities and Threats Wts Ratings Score
User base boosted by Demonetization drive 0.14 4 0.56
Projects like NOFN (National Optical Fiber Network) supported by government 0.12 3 0.36
Decreasing prices of Data (JIO entry) as well as smart phones 0.12 3 0.36
Speculations for entry of Alibaba into Indian e commerce market 0.10 4 0.40
Lack of awareness of digital payments amongst rural India which contributes around 60%
0.10 1 0.10
population

Introduction of Payment Regulatory Board under RBI to accelerate growth 0.07 3 0.21

With the win of BJP government in various states, Digital India will get a boost 0.07 3 0.21
Rise of competitors like Mobikwik, Freecharge, BHIM 0.07 2 0.14
Government support to BHIM 0.07 1 0.07
Growing Start-ups benefitting Paytm business 0.05 3 0.15
Paytm has launched a bill payments service in Canada, first foray into international market 0.05 3 0.15

PayPals acquisition of freecharge 0.04 2 0.08

2.79
TOTAL EFE WEIGHTED SCORE: 2.79
 Matrix snapshot, explanation
IFE Weighted
Strong Average Weak
Scores 3.0-4.0 2.0-2.99
EFE Weighted
2.94 1.0-1.99
Scores
3.0-4.0
Strong

HOLD &
MAINTAIN

2.79
Average
2.0-2.99
1.0-1.99
Weak
 strategy implications
IFE Score 2.79 EFE Score 2.94

Strategy Hold & Maintain

Reinvestment of its capital

Technological capacity to bear unanticipated load

Ecommerce business low barrier to entry

Foresee the benefits of projects like NOFN (National Optical fibre network)

Target Tier 3 cities, along with rural areas

Space Matrix - Paytm

X-axis 1.6
Y-axis -0.2
 QSPM Matrix External Factors

External factors
Merger with Organic
Competitor Growth

Opportunities Weight AS TAS AS TAS

1. Demonetization drive 0.14 4 0.56 4 0.56
2. Projects like NOFN 0.12 3 0.36 3 0.36
3. Decreasing prices of Data 0.12 4 0.48 3 0.36
4. Entry of Alibaba into Indian e commerce market 0.10 4 0.40 4 0.40
5. Payment Regulatory Board under RBI 0.07 2 0.14 3 0.21
6. Boost to Digital India 0.07 4 0.28 3 0.21
7. Growing Start-ups benefitting Paytm business 0.05 3 0.15 3 0.15
8. Foray into international market 0.05 3 0.15 3 0.15

Threats Weight AS TAS AS TAS

1. Lack of awareness in rural India 0.10 1 0.10 1 0.10
2. Competition from MobiKwik, BHIM, Freecharge 0.07 2 0.14 2 0.14
3. Government support to BHIM 0.07 1 0.07 1 0.07
4. PayPal's acquisition of Freecharge 0.04 2 0.08 2 0.08
 QSPM Matrix Internal Factors
Merger with Organic
Internal factors Competitor Growth
Strengths Weight AS TAS AS TAS
1.
Alibaba understand the dynamics of the e commerce business 0.15 4 0.60 4 0.60
2.
UPI enabled system and IMPS for instant fund transfer 0.12 3 0.36 3 0.36
3.
Offline transactions have overtaken online transactions 0.10 4 0.40 3 0.30
4.
Largest mobile payment platform 0.10 4 0.40 4 0.40
5.
Aggressive plans to grow merchant network 0.07 4 0.28 4 0.28
6.
Take QR payment solutions to sellers 0.07 4 0.28 3 0.21
7.
Technical expertise in handling frauds in payment banks 0.05 3 0.15 4 0.20
8.
Compatible with all platforms eg: Android, iOS, Windows 0.05 4 0.20 3 0.15
9.
Launch of payment banks 0.05 3 0.15 3 0.15

Weaknesses Weight AS TAS AS TAS

1.
High attrition of the top brass of the company 0.12 1 0.12 1 0.12
2.
Failure during unexpected change in environment 0.07 1 0.07 1 0.07
3.
Internet penetration still not significant 0.05 2 0.10 2 0.10
TOTALS 6.02 > 5.73
 Ansoffs growth strategy matrix for Paytm

Market penetration Product development

Dedicated last mile logistics NFC technology
Existing

Improved customer service Groceries

M Improved user experience Bancassurance
Information symmetry C2C platform
A
Private Labels
R
K Market development Diversification
E International expansion in B2B platform
emerging economies like Brazil,
Buy and stream entertainment
New

T Mexico, Indonesia etc

Rural markets and Tier 3 cities

Existing New
PRODUCTS
 RISKS

POLITICAL SOCIAL Legal

Impact of GST Wallet doesnt earn Section 43 A of IT
interest act

TECHNICAL
ECONOMICAL
Interoperability is an Hardware level
issue security
 Classification of Risk
CONTINGENCY PLAN
High

Hardware Level Security

Perceived relative importance of risk

Impact of GST Hardware level Tie up with Google and Apple to develop hardware level security
Interoperability security

Interoperability
Be collaborative and partner with other firms

Wallet doesnt Litigation and Social Acceptance

give interest Reimbursement The app should be very easy to use and glitch free

Litigation
Low

Insurance will cover the company

Low High
Perceived level of Control
 Recommendations

Digital India
Grab the first mover advantage in National Optic fiber network program supported by the Government

Market Increased awareness of payment through featured phones and alternative payment methods
Penetration

Customer Pull the customers on the platform by providing NFC support which enables to Tap and Pay
Loyalty

E-commerce Huge scope of improvement in logistics and warehouse management

Emerging
Move to emerging international markets like Brazil, Mexico, Indonesia
Markets
THANK YOU