Flexible in Approach, Firm on Results

Wallet Market Report (Paytm)

March 2016 Data

Published in April 2016

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Executive Summary

Overall  Paytm had an average of 19.5 lac transactions per day in Mar 2016 (excluding P2P
Business transfers or transactions that add balance to wallet)
Volume (Mar
2016)  GMV/GPV (Gross Payment Value) for all verticals was ~INR 1,700 Cr

Recharge and Bill

Payments
 Gross Payment Value
(GPV): Increased to INR
800 Cr from INR 710 Cr in
Oct, driven by higher ATV:
o ATV: INR 180 in Mar vs.
INR 145 in Oct 2015
 Transactions: 14 lacs per
day in Mar 2016 vs 16 lacs
in Oct 2015; transaction
share:
o Mobile Recharge: 77%
o Data Card: 11%
o DTH: 6%
o Bill Payments: 6%
Source: Primary Research; RedSeer Estimates
Wallets Travel and Others
 Transaction on Paytm (On-Deck): 7.7 lac+ daily  Travel (hotels and buses):
Paytm platform transactions INR 75-90 Cr GMV, up from
o 50-55% of all recharge/bill payments INR 22 Cr in Oct 2015
transactions (~7 lac daily) o 27,500 daily transactions
o ~52% of marketplace transactions (~40k daily) o ATV: INR 1,000
 3rd Party (3P) Merchant Transactions: 4.3-4.4
lacs average daily transactions, with a monthly
o Other verticals including
GPV of ~INR 390- 400 Cr, up from INR 335 Cr in
events, insurance etc. :
Oct 2015:
INR 30-50 Cr GMV
o Key Merchants: Uber: 25-30%, IRCTC: 8% (moderate confidence,
o Offline Payments Share: 7% (30-35k daily further breakdown
transactions) unavailable)
 Wallet Base:
o Registered Wallets: 120 million
o Active Wallets (having money): 50 million
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Overall Paytm Business

The five verticals under the Paytm brand generated ~1,700 Cr of GMV/GPV in
Mar 2016
Business Shares
March 2016 figures

Recharge and Wallet 3P

Vertical-> Marketplace Travel2 Total3
Bill Payments1 Transactions

Monthly Gross
~INR 800 Cr ~INR 390-400 Cr INR 330 Cr INR 75- 90 Cr ~ INR 1,700 Cr
GMV/GPV

Average Daily 4,30,000-

~14,00,000 78,000 27,500 ~19,50,000
Transactions 4,40,000

Daily Transacting
10,50,000 ~3,50,000 ~72k Data unavailable ~14-15 lacs
Users

Average
Transaction ~ INR 180 ~ INR 300 ~ INR 1,400 ~ INR 1,000 ~ INR 290
Value

Note: 1. Recharge Includes DTH as well

2. Travel marketplace includes air, bus and hotels
3. Excludes P2P and Wallet Top Ups

Source: Primary Research; RedSeer Estimates

| 3
Recharge and Bill payment Business

Recharge and bill payments constitutes the largest business vertical for
Paytm with ~14 lacs transactions daily as of Mar 2016
Recharge and Bill Payments breakdown
Average figures for March 2016

~14 lacs Key Insights

transactions per day
 Average transaction value
6% o Mobile Recharge: INR 120
6%
Bill payments
11% o DTH: INR 800
o Electricity Bill Payments: INR 900
Direct-To-Home TV  Within bill payments, electricity bills is
one of the fastest growing categories
 Recharge transactions geographic
Data Card 77% split-
o North India: 40%
Mobile Recharge o East India: 10%
o West India: 20%
Share of Recharge and Bill o South India: 30%
Payment Transactions

Source: Primary Research; RedSeer analysis | 4

Wallet Business

Wallet 3P daily transactions stood at 4.3-4.4 lacs in Mar 2016; ~7.7 lacs daily
on-deck transactions were recorded
Wallet usage Trends
Key Insights, March 2016

Research Area Key Insights

 Total 3P Transactions and GPV: 4,30,000- 4,40,000 daily transactions (excluding P2P,
bank transfers and wallet loading transactions) with a monthly GPV of INR 390-400 Cr
Wallet 3P  Share of Top Wallet Merchants: Uber continued to be the largest 3P merchant with 25-
Transactions 30% of all transactions. IRCTC followed with ~8% of all 3P transactions
 Offline Merchants: Contributed ~7% of all wallet 3P transactions (30-35k transactions
per day)

 Paytm wallet contributed the following transaction volumes to overall business in Mar
2016:
Wallet On-Deck o 50-55% of all recharge/bill payments transactions (~7 lac daily transactions)
Transactions o ~52% of all marketplace transactions (~40k daily transactions)
o ~7.7+ lacs on-deck transactions daily (including travel and other verticals)

 Wallet Base: ~12 Crores, Active Wallets in use (with balance): ~5 crores
 Total amount parked in Paytm wallets at the end of Mar 2016 dropped
to INR 100 Cr from ~150 Cr in Oct 2015, due to lower cashbacks to customers
Key Wallet
Metrics  KYC Compliant Wallets: 4-5% of all wallets (moderate confidence)
 GMV split of wallet transactions by city tier
o Metro: 70%, Tier 1: 20-25%, Tier 2: 5%

Source: Primary Research; RedSeer Estimates | 5

Wallet Business

Short term wallet focus is on increasing the share of KYC customers; in the
longer term, Paytm is also looking at deploying wallet for B2B transactions
Wallet Insights
Key Insights, March 2016

Research Area Key Insights

 Increasing the share of KYC complaint customers

 Ensuring that the wallet is used as a payment mode for every possible purchase
for its customers, be it online or offline
Key Focus Areas
for Wallet Business
 In the longer term, Paytm is also looking at promoting wallet usage for B2B
transactions as it believes that this is an untapped opportunity with a very high
number of transactions taking place

 Paytm is focusing on marketing its wallet aggressively in Tier-2 and Tier-3

cities to acquire more customers, with offline marketing channels being preferred
 One of the initiatives includes targeting restaurant transactions. On-ground
promotion by the Paytm sales team has led to a 15% m-o-m increase in restaurant
Promotion payments taking place through wallet (further details unavailable)
Initiatives
 Paytm has also recently tied up with Dabawallas in Mumbai for wallet
cashbacks. The way it works is that if a person enrols for one month of dabba
service, he gets the value of 5 days worth of service back in his wallet as cashback

Source: Primary Research; RedSeer Estimates | 6

Offline Payments

Paytm has ~15,000 offline wallet merchants currently onboarded. With 30-
35k transactions per day, offline share of 3P transactions is <7%
Offline Merchants Trends
Key Insights

Research Area Key Insights

 Paytm has ~15,000 offline merchants accepting wallet payments as of Mar 2016

 Merchant Type: Merchants are divided into three categories

Offline Wallet o Category A: Big chains and MBOs e.g. Big Bazaar, Dominos, CCD etc. Each Category A
Merchant Count merchant is counted as a single one Pan India, even if it has multiple outlets
and Categorization o Category B: Retail Stores having high existing usage of POS terminals, cards etc.

o Category C: Merchants that deal almost entirely in cash including kirana stores, ’paan
shops’, pharmacies etc. This category also includes autos and local taxi owners, wherein
each owner (even if he owns multiple cars/autos) is considered a single merchant

 Active merchants: About 60-70+% of all merchants are active i.e. getting at least one transaction
through Paytm wallet on a daily basis

 Transaction Volume: ~30-35k daily transactions

Transaction
Trends  Average Transaction Value: INR 400-500

 Category B & C merchants together account for 20-25% of all offline wallet transactions
o These merchants account for less than 10% of the offline GPV due to lower average
transaction values (~INR 100-200)

Source: Primary Research; RedSeer Estimates | 7

Offline Payments

Paytm plans to have ~1 lac offline merchants onboarded by the end of the
current financial year
Offline Merchants Strategy
Key Insights

Research Area Key Insights

 “In the last financial year, we were purely looking at gaining market share in
the offline business and the management was not focusing on revenue part at
all. Hence we were blindly looking to on-board as many category B& C
merchants as possible as we believed that there is a huge potential for
Strategy Till The eliminating cash usage from these guys.”
End of FY15-16
 “However, while we have succeeded in onboarding many such merchants, the
average daily transaction count and value is quite small for them, leading
to a very small GPV contribution. Thus the management is rethinking this
strategy for next FY “

 “In the next financial year, we will be focusing on onboarding a lot more
Category A merchants besides Category B and C ones”

 “We are targeting a total offline merchant count of 1 lac by the end of FY16-
Forward Looking
17”
Strategy
 “We expect more than 30-35% of total wallet 3P transactions to be
generated from offline merchants by the end of FY16-17, up from ~7%
now”

Source: Primary Research; RedSeer Estimates | 8

Future plans

Paytm has planned aggressive investments and set ambitious targets for its
proposed payments bank
Payments Bank Strategy
Key Insights

Research Area Key Insights from Secondary Research

 Target launch date is Aug 2016 and the bank will likely launch with 20 million
accounts. Paytm plans to turn its 120 million wallet users into account holders
once the bank services are launched (further details unavailable)

 Aggressive hiring plans have been made for the payments bank team. 3000+ staff
Payments Bank planned to be hired till late 2017
Launch Insights
 Paytm has entered into a technology tie-up with US-based company FIS Global
for the payments bank. Value of the five-year agreement is worth ~INR 150 Cr

o As a part of this deal, FIS will provide payment processing and banking
solutions including software, services and technology to Paytm

 Investment of INR 1,200 Cr is planned for the first three years. Paytm is
looking to set up 20 large branches, 200 smaller branches, and take on at least
1,000 agents in this period
Planned Network
and Service  One of the planned offerings is a cardless credit card backed by a bank, which
Offerings could be connected to a customer's Paytm wallet. This could be further used for
transacting with Paytm’s large online and offline merchant network

Source: Secondary Research; RedSeer Analysis | 9

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