“Paytm should have never done its IPO (initial public offering). It has turned out to be disastrous for the company,” a senior official at Paytm told The Head and Tale. 

And, rightly so. 

The market capitalization of the Noida-based fintech giant One 97 Communications (the parent company of Paytm) – which was valued at about $20 billion during its IPO in 2021 – has crashed to $2.4 billion as of May 8, 2024. 

While the company’s share price was hardly on an upward trajectory ever since it got listed, it got to its lowest point when the Reserve Bank of India pulled the plug on Paytm Payments Bank in February this year over anti-money laundering (AML) concerns. Not only did Paytm’s stock hit an all-time low – but it also “made its founder and chief executive officer Vijay Shekhar Sharma at his weakest,” another person aware of the matter said. 

With the payments bank dead, the company’s only growth engine ‘lending’ impacted, and the “licence play” almost over, Paytm currently in a DSA (direct selling agent) avatar – is back in control of Sharma. 

When the Paytm Payments Bank fiasco happened earlier this year, its CEO Surinder Chawla resigned. And, now when the company is under stress from all sides – Sharma’s close confidante Bhavesh Gupta, who literally controlled payments, lending, insurance and even the payments bank; and in the words of one of the senior executives was “turning things around” for the company, has resigned. 

But, the story of Vijay Shekhar Sharma and Bhavesh Gupta is not as simple as it may sound.

Bhavesh Gupta’s journey at Paytm

First, let’s take a look at Bhavesh Gupta’s journey at Paytm. Prior to joining Paytm, Gupta served as the chief executive of Gurgaon-based non-banking financial company (NBFC) Clix Capital, earlier known as GE Capital India.

Paytm announced its lending play with the short-term instant loan ‘Postpaid’ with ICICI Bank at the end of 2017. However, after a few months, the service was shut down over regulatory concerns. According to sources at the time, the company – flush with money from its Chinese investor Alibaba – was owning the risk and lending from its own pocket. This did not sit well with regulators because, according to RBI guidelines, payments banks aren’t allowed to lend.

Soon after in 2019, Clix Capital came to Paytm’s rescue, and the fintech company started lending from Clix’ books to its Postpaid users. Just a year later, in August 2020, Bhavesh Gupta was brought in by Paytm as CEO of its lending business. Until then, former Goldman Sachs executive Amit Nayyar – who joined Paytm in August 2019 and resigned just before the IPO -- led the company’s foray into financial services across lending, insurance, and wealth management. 

In a few years, Gupta gained control of all important verticals, including payments, lending, insurance, and bank.

A former Paytm executive, who was privy to the drama and politics happening inside the company at that time, informed, “During the IPO time, Bhavesh used to report to Amit Nayyar. Then Bhavesh said, ‘I know lending better,’ so Nayyar was sidelined and eventually exited. He then said all financial services heads will report to me instead of reporting to Nayyar. Then, Bhavesh made another point saying the quality of merchant payment (offline) data is not good, so we can’t lend to them – eventually, that led to Vijay asking his long-time confidante Renu Satti to report to Bhavesh – and eventually Renu exited. Then, Bhavesh started pointing out issues in how the bank was run, then Vijay brought him onto the bank board – and the then CEO Satish Kumar Gupta, who was nearing his retirement age, was sidelined. And then, Bhavesh started bringing in his own people from Clix Capital, ICICI Bank. But the company had to get a CEO, and that’s when Surinder Chawla from RBL Bank was appointed – and not in so many words, but Chawla was kind of reporting to Bhavesh.”

But Bhavesh Gupta's team admires his clear thinking in business matters. 

When the company’s stocks plummeted to Rs 600, but it also went up to Rs 900, so there was some hope, and that hope was created because of Bhavesh and no one else, the senior official at Paytm quoted above said. 

“Bhavesh was a P&L oriented person; he identified data to convert it into loans...and he turned things around. He made the company and team P&L oriented; even Vijay took some interest in P&L, but then he realized P&L is not his cup of tea. He left everything to Bhavesh. Vijay is a product and tech person, and he reviews that regularly,” he added. “Even the Paytm CFO never took the opportunity to handle the P&L part. Bhavesh was an inspiration to many people at Paytm,” he added.

Behind the scenes

According to sources, early last year, Paytm’s arch-rival BharatPe was trying to rope in Bhavesh Gupta as its CEO, but the talks failed. Soon after, in May 2023, Gupta was promoted as the president and chief operating officer of Paytm. 

The sources said that in October-November 2023, when things were too rosy at Paytm, Gupta was even promised the CEO position, due in April-May this year, and that Sharma was supposed to take a step back and take up a non-executive chairman role. 

"During that time, Paytm was disbursing around Rs 1600 crore in merchant loans, and the plan was to close March 2024 at Rs 2500 crore. We were getting near to EBITDA positive levels, and in January this year, we were almost at the break-even level. That was a time when we thought Paytm was at its strongest phase,” the senior official at Paytm quoted earlier said.

But then the bank fiasco happened in February. So, whatever promises were made to Gupta took a backseat.

Another person familiar with the matter mentioned that there was a Paytm annual operating meeting held between March 21-23 at Leela Palace, Jaipur, to discuss plans for FY2025. All heads, CBOs, and VPs were invited, totalling over 100 executives. "During the meeting, Bhavesh expressed a contradictory view to Vijay, leading to an open and heated discussion regarding certain costs. Bhavesh even had to request Vijay to continue the discussion offline."

The former Paytm executive believes, "Bhavesh became too important for Paytm, and Vijay was sitting silently. But when the bank is down, lending is down, then Vijay started questioning Bhavesh since he was running pretty much everything at Paytm. That’s where Bhavesh said he can’t continue, and that he will take all his people along with him. Vijay fired everyone close to Bhavesh immediately, and they were removed from the company’s WhatsApp group.” 

"It's more of an ego war between them. Any association with Bhavesh, Vijay has made the call to fire that person,” the senior official at Paytm added.

An official at Paytm, who preferred not to be named, admitted, “While it's true that Bhavesh was promised the CEO position as part of Vijay's succession planning, there was no argument over the CEO position. The main point of contention was that Bhavesh built his own empire and created a work environment where many long-time employees started leaving the firm, leading to discontent. He also brought in his own people. When Vijay realized this, he began to see the gaps and decided to take back control, which was the right thing to do.”

About 15-20 people, all at the CBO/senior vice president level who Gupta brought in from Clix Capital and ICICI Bank, have been asked to go, three sources confirmed. Some names are Ajay Vikram Singh (chief business officer), Bipin Kaul (chief business officer), Sandeepan Kashyap, Nakul Jain, Neha Gupta (HR), and many others. [Jain’s departure could not be ascertained yet.]

"Nakul Jain is not leaving the company," says Paytm spokesperson.

Most were at above Rs 1 crore salary levels, one of the sources added. 

On Singh, Kaul, and Kashyap’s exit, the official at Paytm added that they were let go 2-3 weeks before Gupta’s resignation.

Interestingly, as per Gupta’s LinkedIn profile, he has been with the company for three years and ten months. A person, quoted earlier in the story, who spent a good number of years at Paytm highlighted that the ESOPs (employee stock options pool) in the 4th or 5th year are substantial i.e. about 40%. One may argue that Paytm’s ESOPs don’t hold any value but Vijay gave ESOPs worth crores – so that way that money is saved now. 

With Paytm in the news for all negative reasons and senior-level exits, Paytm hasn’t done any town hall. 

“Vijay is meeting people one-on-one in the office,” the Paytm official informed. 

One may argue that management crisis is the biggest crisis, but inside Paytm, the employees are worried about work from the office policy. 

Starting May, Paytm has made work from office mandatory. “Now, we have to come to office three days a week. Since Covid, techies have been working out of Tier 2-3 cities. Retaining tech talent is going to be a challenge for Paytm,” the senior official quoted earlier said. 

On the payments side, Paytm has been continuously losing market share in the UPI payments space to rivals as its market share has come down to 8.3% from some 13.5% some months ago. “The market share of Paytm on the merchant QR side was close to 70-75% at one point, but that has come close to about 40%, post the bank fiasco,” the official said. 

On the lending side, there was “zero” lending in the month of February. A lot of lenders backed out. In the month of April, on the merchant lending side, the company disbursed close to Rs 1000 crore backed by Aditya Birla Finance Limited (ABFL) and Fullerton. 

This time the game has been reversed. 

There was a time when traditional companies wanted to work with Paytm on Paytm’s terms; but now lenders are dictating the terms. An industry official, aware of the Paytm’s lending partnerships, said, “Both Fullerton and ABFL have started Paytm but it’s not on FLDG (first loss default guarantee) model. It is on corporate DSA (direct selling agent) model where they are just sourcing leads for these lenders.” 

Fullerton was scared a lot to partner again “but now they are comfortable as it’s just sourcing of leads,” he shares.

“Currently, lenders are limited; and on the insurance side, new products were planned to be launched by Bhavesh. This is the worst time for Bhavesh’s exit. Shares are at its lowest, customers have switched their payments app to PhonePe and other rivals; merchants are moving. At this point, Paytm needed support and needed their best people but here it is exact opposite. The strongest person has been asked to leave because of the ego war, and the work from home policy is cancelled. The situation is not going to stabilize anytime soon, everything is directionless. There is going to be attrition,” one of the officials says.

If an indirect source is to be believed, on May 6, Sharma conducted a closed-door meeting with few officials; and said that calling employees to work from office is intentional as this would result in natural attrition, instead of laying off. “It is chaotic.”

Total employee strength of Paytm is about 8000-10000, excluding off-roll workforce.

It’s all about timing

While employees and investors would believe that Paytm is in a deep mess, on the contrary, the former Paytm official believes that this is a smart strategy by Vijay Shekhar Sharma. “With Paytm’s regulatory game missing for at least 2-3 years, it all makes sense now. In its DSA avatar, Paytm doesn’t need a lot of senior officials and the level of compliance to sell loans, bank accounts, and insurance. They just need people with a good distribution background who can execute well.”

He believes that Paytm might bring some of its old people back into the system. “In my opinion, this is a smart strategy to cut costs. And, in the next few months, they may be able to show numbers in insurance and broking. Till now, their focus was on lending, but since they have become a DSA, they can open current accounts on behalf of partner banks, sell loans, insurance, etc.,” he added.

Despite widespread speculation about the non-functionality and messiness of Paytm Payments Bank, the RBI has not yet cancelled its license. Some suggest that Paytm should give up the license voluntarily, but Sharma's ego, because the license is in his name, might be getting in the way.

The Paytm official quoted earlier in the story further added that Paytm has not given up on its payments bank licence yet and is “still working on it.”

A detailed set of questions sent to Paytm did not elicit any response. Bhavesh Gupta did not respond to query sent over LinkedIn.