Paytm raises a billion dollars at a valuation of $16 bn, plans expansion

Ant Financial and SoftBank back it with full force; money will go for expansion in small cities, towns.

Business Standard : In a mega funding round, Paytm, the country’s top financial technology entity, has raised a billion dollars (Rs 7,200 crore), at a valuation of $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.

Discovery Capital, 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.

With this funding round, the Vijay Shekhar Sharma-led fintech giant has become a top-tier Asian digital firm, much ahead of others. In this round, the company made a $1-billion equity closure, where SoftBank Vision Fund (SVF) invested $200 million, Jack Ma’s Ant Financial added $400 million and the balance amount came from T Rowe Price and Discovery, among others.

This has happened in a climate where investors are not making big bets on companies and SoftBank is still reeling from the WeWork Initial Public Offer debacle. Till now, Paytm has raised a little over $2.5 billion in investments. Proceeds from the latest round would be directed towards further expanding it’s 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 Vijay Shekhar Sharma told Business Standard.

Talks for the new funding round started last year in December. The company has since had several rounds of discussion with its investors. The existing ones 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 Sharma.

SoftBank Group, Ant Financial likely to invest $2 billion in Paytm

Paytm has in a decade become India's biggest digital-payments brand.

Fintech major Paytm is close to scoring $2 billion of new financing from investors, including Jack Ma's Ant Financial and Japan’s SoftBank Group Corp, to fend off an influx of new rivals, a person familiar with the matter said.

The funding will be split evenly between equity and debt and values the country’s top online financial services firm at $16 billion, the person said, asking not to be identified talking about a private deal. The talks are in their final stages but the terms could still change, the person added.

If a deal is finalised, Paytm could outstrip fellow high-profile Asian start-ups such as Grab and Gojek in valuation.

Billionaire Paytm founder Vijay Shekhar Sharma is raising capital to protect the start-up’s share of a potentially $1 trillion Indian payments market from new entrants, including Facebook, Alphabet's Google and Walmart-owned Flipkart's PhonePe. Over the past year, a string of new apps have made payments increasingly easy, bringing discounts and cash bonuses to young, smartphone-savvy users.

Credit Suisse Group AG now estimates that the Indian digital payments market will touch $1 trillion by 2023 from about $200 billion currently. It's a market with huge potential: Cash still accounts for 70 per cent of all Indian transactions by value, according to Credit Suisse, and neighboring China is far more advanced with a mobile payments market worth more than $5 trillion.

ALSO READ: WeWork IPO debacle a lesson, says Paytm founder Vijay Shekhar Sharma

Paytm, which is also backed by Alibaba Group Holding, declined to comment in response to emailed questions. SoftBank wasn't immediately available for comment during a Japanese national holiday. Ant had no immediate comment when contacted.

Paytm has in a decade become India's biggest digital-payments brand, attracting big names in investing from Ma and SoftBank Founder Masayoshi Son to Warren Buffett. Paytm's Sharma got a huge boost in 2016 after India's government moved to eliminate most of the nation's paper money in circulation in a bid to curb corruption. His start-up, a pioneer in the country's nascent field, saw tens of millions of consumers and hundreds of thousands of businesses sign up for digital services in a matter of months.