[Funding Alert] Paytm raises $1B in funding from Softbank and others at $16B valuation

By Tarush Bhalla
November 25, 2019, Updated on : Mon Nov 25 2019 00:31:31 GMT+0000
[Funding Alert] Paytm raises $1B in funding from Softbank and others at $16B valuation
Paytm will use the fresh investment to grow its payments and financial services business and looks to invest Rs 10,000 crore over the next 3 years to acquire more customers in rural India.
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One97 Communications Limited (OCL), parent company of Indian digital payments leader Paytm, on Monday announced an equity fundraise from a group of investors, including existing shareholders such as Ant Financial and Softbank Vision Fund.

New investors, including funds and accounts advised by T Rowe Price Associates Inc. along with Discovery Capital also participated in the round.

Sources close to the fundraise confirmed that the equity raised by the company is around $1 billion. Following this transaction, the valuation of OCL stands at around $16 billion.  

Paytm, Vijay Shekhar Sharma

Vijay Shekhar Sharma, Founder of One97 Communications

This is a markup from the valuation of $10 billion the company was ascribed to in August 2018, when it raised about $300 million from American multinational conglomerate, Berkshire Hathaway. The transaction marked Berkshire Hathaway’s first investment in an Indian technology firm.

In a statement to the media, Paytm said that it is currently serving merchants in over 2000 towns and cities spanning across 650 districts in India. With this investment, Paytm hopes to bring low-cost mobile enabled financial services to rural India.

According to the company, it will invest and support millions of rural Indians towards self-sustainability through job creation. It looks to invest Rs 10,000 crores (about $1.3 billion at current exchange rate) over the next 3 years to bring financial inclusion to the more underserved users in the country.  

Speaking about the recent investment, Vijay Shekhar Sharma, Founder & CEO of Paytm, said,

"At Paytm, we are committed to bringing half a billion Indians to the mainstream economy by on-boarding them in the formal financial ecosystem. This new investment by our current and new investors is a reaffirmation of our commitment to serve Indians with new-age financial services."

Earlier this month, a few media reports announced that Paytm’s investor Softbank Vision Fund is pushing the company for an IPO within five years from the time of the completion of this round. However, YourStory sources in the company have denied this, stating that the matter has been "misconstrued by the media".

Pouring in heavy investments

In September, an official statement from Paytm said that the company has been (for the last two years) investing close to $1 billion each year to expand the digital payments ecosystem in the country. 

In August, it said that it is allocating Rs 750 crore this financial year, only to acquire new customers and merchants in small towns and cities.

The firm, which claims to have touched 400 million users in India, is targeting to reach 250 million monthly active users and achieve over three billion sessions of users logging onto the application for payments and money transfers (P2P) this fiscal year. 

Earlier in June, it said that it tweaked its infamous cashback strategy to focus on offline merchant payments at offline retail kirana stores.

The company has also taken an audacious goal this fiscal to enable 20 million retail merchants to accept digital payments through Paytm QR.

At present, Paytm has been facing a tough competition from Google Pay and Walmart-owned PhonePe. If industry analysts are to be believed, Google Pay currently owns half the market in terms of P2P UPI transactions, followed by Paytm and then PhonePe.

In addition to just its core payment business, Paytm recently announced that it will be investing Rs 500 crore in early stage startups, which will provide value to its ecosystem.

Earlier in August, it also won the bid and acquired sponsorship rights for BCCI's international and domestic cricket matches for 2019-23 home season at the winning bid price of Rs 326.80 crore.  

Moreover, Paytm has also been making investments this year in subsidiaries like Paytm First Games, its foray into mobile gaming; its wealth management arm Paytm Money, along with startups like HungerBox.

The company has also increased its gamut of services to enter the education segment as well as the domestic hotel booking segment, with its acquisition of Nightstay.

At YourStory’s tenth edition of Techsparks, Paytm Founder Vijay Shekhar Sharma commented on this strategy, and said that the company is aspiring to introduce more services and be the internet ecosystem in India. 

“I don't follow the fintech industry. I follow the journey of a customer. Over a period of time, we will be an internet ecosystem in India with the largest pool of users. It has happened in the US and in China,” Vijay asserted.

Paytm has been investing $1 billion every year to increase the gamut of its payment services in India's Tier 3 & 4 geographies.

Widening losses

While Paytm looks flush with funds, the financial situation of the company seems to be shaky.

According to recent filings, One97 Communications' consolidated losses soared to Rs 4,217.20 crore in the fiscal year 2018-19. This is a 163 percent increase from last fiscal year (FY’18), when the consolidated losses for the company stood at Rs 1,604.34 crore. 

With mounting losses, the revenue of the firm hasn't grown significantly either. 

One97 Communications’ consolidated revenue stood at Rs 3,579.67 crore in FY’19. This is not much of an increase (approx eight percent) since last fiscal (FY’18), when the consolidated revenue for the company stood at Rs 3,309.61 crore.

At present, Paytm counts Softbank, Ant Financial (Alipay), Alibaba Group, SAIF Partners, and Berkshire Hathaway, as its investors.

(Edited by Dipti Nair)