Alibaba-backed One97 Communications Ltd., the parent company behind PayTM — recently received a payment backing license from the RBI along with 10 other corporations. Co-founder and CEO Vijay Shekhar Sharma has now told Livemint, that his company will spin-off all of its payments related service under a new subsidiary.
He details, that the company will not be running its new business under the same company. Instead, it will create a new arm named PayTM Payment Bank Ltd. for the payments business which will handle all of the company’s payments businesses including existing services like Paytm wallet. However, its e-commerce business will continue to remain under One97 Communications.
One97 Communications will hold about 40 percent stake in the newly created PayTM Payment Bank Ltd. while the company’s founder Vijay Sharma will hold about 51 percent of the company. Remaining 9 percent stake will be with the other subsidiary of One97. The majority stake of the company will be with Vijay Sharma as RBI has ruled that an Indian promoter should own a majority stake in the company.
The move though, is pretty much obvious, considering that majority of One97’s current holding lies with its investors, which would have made the company ineligible for operating under RBI’s license, due to the 51% Indian promoter-ownership clause.
This new entity will have a new leadership team. They will also have a new CEO to look after business and will hire about 2,500 new employees in the company. It plans to have on-ground touch points and banking correspondents for growing its reach and to bring the unbanked on its platform. Sharma is aiming to have more than 500 million users on its platform by 2020.
Vijay Shekhar Sharma, founder and CEO of PayTM, said,
Licence brings us the third part of our business model: Pay, Buy and Save. And by savings, I mean that consumer deposits can now come, which will make payments far more seamless as the cash will be immediately available within your wallet. Earlier, consumers did not have the incentive or the intent to keep balance in wallets. But now, with consumers getting interest on their deposits, it will be like any other savings bank account.
Pay TM, founded in 2010, has more than 102 million wallets and expects 115 million wallets by December 2015. It has over 80,000 merchants on its platform and is expecting to touch close to 100,000 by the year-end after it allows zero-commission listings.
The company is backed by SAIF Partners, which holds close to a 37% stake in the company. In February, Alibaba’s Ant Financial bought 25% stake of the company for $575 million. It is looking to raise more than $400 million from Alibaba by diluting additional stake.