Paytm head Vijay Shekhar Sharma has admitted unearthing of financial fraud in Paytm Mall following a probe into cashbacks earned by small merchants.
Speaking to media, Sharma said that the overall size of the fraud is in `double digit’ and is in range of Rs 5-10 crore for sure.
However, sources privy to development indicated the size to be in proximity of Rs 50-70 Cr while speaking to Entrackr on condition of anonymity.
It is worth mentioning that on May 9, Entrackr first broke the news of Paytm engaging Ernst and Young to conduct the forensic audit to detect possible fraud. Since then there have been several unconfirmed media reports hinting a fraud involving company employees
Sharma said that post-Diwali, Paytm team noticed some small sellers getting a large percentage of the cashbacks and hence they asked the auditors to dig deeper. The auditors found that some junior and mid-level employees were colluding with sellers to earn cashbacks. They allegedly worked with third-party vendors and created fake orders to siphon off cashbacks.
He mentioned that actions against wrongdoers are being taken which include delisting of hundreds of sellers and sacking of `tens’ of employees. While the number of sellers would reduce, such stringent action will ensure a better ecosystem for the consumer, he opined.
Sharma still sounded optimistic about the cashback model, deeming it sustainable.
However, profitability is still some time away from the firm.
He claimed that Paytm is actually net positive, net of cashback, marketing promotions and operating costs but the firm will not be profitable till its user base reaches 500 million from 300 million and merchant base jumps to 40 million from current 12 million.
It is noteworthy that Entrackr has already first reported the story that following heavy losses, the Alibaba backed Paytm Mall is in the process of down scaling its operations.
Update: The amount unearthed during the probe is estimated to be in the range of Rs 5-10 crore, not Rs 10 crore as earlier reported, as per Paytm Mall. The same has been updated in the headline.