Retail

Paytm gets $1 billion topup in latest financing round


BENGALURU: Digital payments company Paytm said it has raised $1 billion in a financing round led by US asset manager T Rowe Price with existing investors Ant Financial and SoftBank Vision Fund also participating.

This is the largest amount raised by an Indian startup this year. The company said this values it at close to $16 billion. Discovery Capital, an existing shareholder in the Noida-headquartered firm, also took part in the latest funding round.

“It’s a $1 billion raise led by T Rowe Price,” said Vijay Shekhar Sharma, CEO of One97 Communications, Paytm’s parent. “SoftBank has pumped in $200 million while Ant Financial has invested $400 million at a $16 billion valuation.”

This takes the total investment raised by the company to about $3.5 billion.

ET was the first report on T Rowe Price leading the latest funding round at Paytm on October 15.

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This is a rare bet for T Rowe Price, which manages more than $1 trillion in assets, on a privately held Indian technology startup, after its investment in Flipkart, owned by Walmart.

CEO Sharma Dismisses Threats from Rivals

When contacted by ET, a spokesperson for T Rowe Price said, “We don’t have a comment for that.”

An Alipay media representative said, “Please note we don’t have much to add and you may want to refer to Paytm’s press release for details.” A SoftBank spokesperson declined to comment.

Paytm had last raised $300 million from Warren Buffett’s Berkshire Hathaway in September 2018, valuing the company at $10 billion. This is the first primary investment round since then. However, over the course of this year, the company has cashed out employee stock options at a $16 billion valuation.

“This new investment by our current and new investors is a reaffirmation of our commitment to serve Indians with new-age financial services,” Sharma said. Over the course of the next three years, Paytm will invest Rs 10,000 crore to acquire customers and merchants in smaller towns, and online merchants. “The primary intention is to become more inclusion-centric and provide financial services for the underserved and unserved by leveraging technology as a distribution platform,” he told ET.

Sharma stressed that certain businesses within Paytm, including payments and ticketing, are in the process of breaking even and the company is investing in newer business lines such as financial services and insurance, among others.

‘Business mature now’

“Our payment business is fairly mature now and is contribution breakeven, while commerce verticals are making some money,” he said.

Earlier this year, Paytm began fundraising efforts to pick up close to $2 billion but trimmed the size of the round amid heated competition and widening losses in the digital payments segment. Walmart-owned PhonePe, which has been looking to spin itself off as a separate entity and raise external capital, has not closed a round as yet.

Sharma dismissed threats from the likes of GooglePay, Amazon-Pay and PhonePe.

“We have been the majority market shareholder of offline and online merchants,” he said. “These people have been spending billions of dollars in the last two-three years but couldn’t even touch our payments business. We have been successful in not just protecting but increasing our market leadership.”

ET reported on November 14 that Paytm’s existing investors such as SoftBank imposed new conditions on the company before investing in this funding round. The Japanese group has stipulated that the company should go public within five years from the time of completion of the transaction, failing which SoftBank will have the right to sell its stake to a rival company, sources had told ET. SoftBank, which first invested in the company in 2017, holds a 19% stake, while the Alibaba Group, through Ant Financial and directly, owns 38% in Paytm.

One97 Communications posted Rs 3,959.6 crore net loss in FY19 against Rs 1,490 crore a year earlier, according to details the company shared with investors, ET reported in September. Its standalone revenue rose marginally to Rs 3,319 crore from Rs 3,229 crore in FY18. The losses its competitors posted have been equally steep. Phone-Pe’s losses amounted to Rs 1,904.72 crore with revenue from operations at Rs 184 crore while Amazon Pay reported a loss of Rs 1,160.8 crore for FY19.





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