The group of existing shareholders, Ant Financial, Softbank Vision Fund, Discover Group, which combined with funds and accounts having advised by T Rowe Price Associates, and a pool of new investors too helped Paytm raise $ 1 billion by participating in a recent financing round.
The company has raised 7200 crores (in Rupees) or $1bn for a valuation of $16 billion from shareholders and investors. The completion of this financing makes Paytm a leading Asian financial services company, leaping well above others in the race. The closure of this round means Paytm has raised a little above $3.5 billion via the investment route.
Among the investments made, SoftBank Vision Fund (SVF), which had been getting over the previous WeWork Initial Public Offer debacle, invested $200 million, in a surprising take while Jack Ma’s Ant Financial funded $400 million. The rest of the net $1bn equity closure came from T Rowe Price Associates and other new investors.
It is a record raise by any company. And with T Rowe Price Associates leading the financing round, the value that gets its closure to 16 billion dollars, gets to become the highest funding collection reached by a startup in this year.
Paytm had previously raised $300 million from Warren Buffett’s Berkshire Hathaway in Sept. 2018, with the company having a valuation of $10 billion. After Berkshire Hathaway concluded, the recent big round becomes the first primary investment round.
In an interview with Business Standard, the head of the digital fintech giant, Vijay Shekhar Sharma talking about the further prospects, told: “Paytm is a great opportunity. We are addressing 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.”
Paytm will be investing Rs. 10,000 crore to attract customers and merchants, primarily in smaller towns, and grow its foothold strongly at other places. It also plans to expand the company’s online merchants over the course of the next three years.
Vijay Shekhar Sharma also hinted at the possibility of having few services to be separated from the current umbrella unit. The splitting up may include Paytm’s digital services like ticketing and online payments. Moreover, Paytm will be investing in other business lines. Sharma said financial services and insurance could be the preferred domains that Paytm is likely to enter, among others.
Reaffirming the broader goals of their startup turned fintech giant, Sharma talked about how the future lies in digital financial services and that technology has a lot to offer in hand.
“This new investment by our current and new investors is a reaffirmation of our commitment to serve Indians with new-age financial services. 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.”
It is to be noted, that though the investments have been pretty huge, companies like SoftBank Vision Fund had put preconditions on Paytm before signing in towards the $200 million investment. Financial debacles like the recent WeWork fiasco can be a firm reason. According to the condition, Paytm should go public within five years from the time the transaction gets completed.
Failing to deliver to this (SWF noted before participating in the funding round), the Japanese company SoftBank would reserve the right to sell its stake to another rival company. They had first invested in the company in the year 2017 with a 19% stake. With a 38% stake in Paytm, comes Jack Ma’s Alibaba Group, which manages through its Ant Financial that invested $ 400 million.
Fairly important to note, that unlike 2016 Paytm is not the only digital financial services. With the arrival of Amazon pay, Google pay, the Indian payments market has changed for better. Their presence benefits from an open payments infrastructure UPI (Unified Payments Interface), which also has backing from the government.
Paytm has stiff competition from others in the line, be it Amazon Pay or Google Pay or Walmart owned PhonePe app. But in the question of whether Sharma sees the competition as being ‘threat’ to his company, he replied in negative how despite having put enormous funding in, his rivals had lagged behind.
“We have been the majority market shareholder of offline and online merchants. 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.”