Paytm, the country’s top financial technology entity, has raised US$ 1 billion (Rs 7,200 crore), at a valuation of US$ 16 billion, from existing shareholders Ant Financial, Softbank Vision Fund and also new investors, including funds and accounts advised by T Rowe Price Associates, among others in a mega funding round.
Over the next three years, Paytm plans to invest an amount of Rs 10,000 crore (US$ 1.43 billion) in order to expand its services in tier-III cities and smaller towns. Discovery Capital, which is an existing shareholder, also participated in the round. Paytm plans to invest Rs 10,000 crore over the next three years, with the stated aim of expanding its services in tier-III cities and smaller towns.
After this funding round, the Mr. Vijay Shekhar Sharma-led fintech giant became a top-tier Asian digital firm, much ahead of others. The company has made US$ 1 billion equity closure in this round, where SoftBank Vision Fund (SVF) invested US$ 200 million, Jack Ma’s Ant Financial added US$ 400 million and the rest balance amount came from T Rowe Price and Discovery, among others.
This comes amidst when the investors are not making big bets on companies and SoftBank is still recovering from the WeWork Initial Public Offer debacle. As of now, Paytm has raised an amount a little over US$ 2.5 billion in investments. The investments from the latest round would be focused on further expanding its payment and financial services business.
“Paytm is a great opportunity. We are addressing the India opportunity the best possible way. I think the very business model of acquiring customers and small businesses and bringing them to the formal financial system is viable and our investors understand that. India is underserved when it comes to financial services and this investment will be used to expand in that direction; our investors believe in that goal…Paytm is reaching its monetisation phase, where other financial services in due course will start bringing in revenue, so it becomes a story of a mature digital financial services company,” founder Mr. Vijay Shekhar Sharma said.
The company started having the talks for the new funding round last year in December and since then had several rounds of discussion with its investors. The existing investors were interested in raising their stakes to fuel the next level of expansion.
“Talks started almost two board meetings back, sometime in December. When we had the Tokyo board meeting in September (this year), we concluded the terms and the agreement happened”,added Mr. Sharma.
The company in its first phase of growth, brought in low-cost digital payments acceptability, using its QR-code technology to shops and retailers and now plans to add a host of Internet of Things (IoT) devices to the mix, enabling small merchants in towns to more easily accept digital payment.
“We are adding physical devices, IoT-based devices, which will enable QR payments, card payments. Devices and IoT-led payment solutions would become an important part in our next level of journey. We have been doing beta tests of some of our IoT devices, which are proving quite successful. Payment driven by mobile phone and QR code is taking the next leap, where merchants will have many device options that will help them to avoid fraud, scale (up) business systems and bring efficiency and trust,” promises Mr. Sharma.
According to Paytm, it now serves merchants in a little over 2,000 cities and towns, in 650 districts.
Paytm will use this Rs 10,000 crore to add as many small merchants and businesses as possible into its fold, although, its competition, including Google Pay and PhonePe, are spending massively on cashbacks.
“We are not that much in P2P (peer-to-peer). We will continue to double down and spend aggressively more into better IoT devices, so that it helps us in signing up small merchants. Our primary business model is merchant payments and the larger part of the funds would be spent there,” he added.
Despite the stiff competition faced by Paytm from other players, company has continued to hold its position as the biggest payments’ player in the country. The sector experts believe that this funding round will help strengthen the company.
The main focus of the company is to expand its reach of its financial services for the company and its backers. Mr. Sharma said there are no plan of going public, as of now. “There is no commitment that we have made for going public. We have clearly said that we want the financial services business to (first) take off. Paytm has been able to build a business that is contribution positive; we are since last year getting into financial services,” he added.
As per the company, Paytm Payments Bank has around 50 million accounts and is among the few mandated by the ministry of electronics and information technology to drive the highest targets for merchant acquisition and digital transactions.
Paytm Money, the financial services firm, is at present one of the largest contributors of new Systematic Investment Plans to the mutual funds segment. It has by now received approval to launch stock broking, dematerialisation services and National Pension System services.