Paytm Money to get Rs 250 crore, eyes low-cost broking business

One97 Communications-promoted Paytm Money will put an additional Rs 250 crore in its investment platform in 12-18 months. 

This will be on top of a Rs 80-crore investment made by the promoter in the first year of business. After building a retail base of nearly one million active users through its direct mutual fund distribution platform, the company plans to disrupt the low-cost broking model. It has already received approvals for providing stockbroking and depository services.

What sets Paytm Money apart from other distributors is that it is registered as an investment adviser with Sebi and does not receive any commission and investors can choose to put money in any of the direct schemes of all 40 mutual funds in the country. Since the entire process of on-boarding the customer to investment and redemption is done through a mobile app without human intervention, the company can enable systematic investment plans (SIPs) for as low as Rs 100.

Speaking to TOI, Paytm Money director Pravin Jadhav said that within a year of launch, the firm has become the largest platform for direct SIP investment plans. “Of the total number of SIP registrations in the country, 40% of accounts go through Paytm Money. We are expanding the market as 80% of our users are first-time investors in the capital markets and come from beyond the top 30 cities in the country,” said Jadhav. 

According to Jadhav, enabling the micro-SIPs will expand the mutual fund investor market to 50 million in four-five years from 19 million at present. “Our focus is on the simplicity of investing for common people. Instead of complex features, we plan to have in the app short videos of fund managers, which will help the investors understand the scheme,” he said.

The company has been able to create a straight-through platform by incorporating UPI for drawing payments from bank accounts and has now introduced net banking-based electronic mandates for SIP plans. Investors can view the performance of every scheme and compare it with others. “Of the total investors in mutual funds, 20% have chosen to park money in instant redemption schemes. Of the rest, 60% of investors have chosen equity, while another 25% have gone for tax-saving schemes, and remaining in debt schemes,” said Jadhav.