Paytm raises $1 Bn at $16 Bn valuation

Digital payments major Paytm has raised $1 billion to bolster its merchant and financial services play in its latest financing round led by US-based asset management firm T Rowe Price.

The fresh investment round saw the participation of Discovery Capital and D1 Capital, who invested primary capital along with T Rowe Price. The three participants together poured in $400 million in the payment firm whereas Paytm’s existing investors SoftBank ($200 Mn) and Alibaba Group affiliate Ant Financial ($400 Mn) put in $600 million together.

With this transaction, SoftBank, which controls about 20% in Paytm's parent entity One97 Communications, will not be allowed to sell its share for the next five years. Though, SoftBank would have the right to sell its shares to existing investors or rival firm only if Paytm goes for an IPO during this timeline, reported TOI.

The Vijay Shekhar Sharma-led firm raised the latest financial round at a valuation of $16 billion, which will make it the most valuable startup in India since Flipkart (valued at $22 Bn) has already been acquired by US-based retailer Walmart.

Paytm will use the capital to push its merchant and financial services offerings like lending, insurance and neo banking. For expansion, Paytm founder and CEO Vijay Shekhar Sharma has allocated Rs 10K crore for the next three years.

It plans to have over 35 million merchants on its platform, from the current base of 15 million, in the next two years.

Paytm claims its margins are now growing positively across payments, commerce and financial services. The company further plans to move away from the discount-led, peer-to-peer payments vertical to focus on online and offline merchants.

In addition to its several financial services, Paytm has been piloting an advertising platform – Paytm Ads. Last month, Entrackr had first reported the development as it began onboarding brands to buy advertising space on the web and mobile apps.

Meanwhile, apart from losing many key employees, the Noida-based firm in the past one year has witnessed a sharp downfall in Unified Payments Interface (UPI) transactions and ceded market share to Google Pay and PhonePe.

Over the year, the Sharma-led company has been bleeding money and still far from being breaking even.

It continues to lose money in acquiring consumers. The payment firm's loss has climbed to Rs 4,217.20 crore in FY19, a surge of almost 163% as compared to the previous fiscal, according to its annual report. The company's operational revenue saw a mere single-digit growth of about 6% to Rs 3232 crore in FY19.