Paytm Raises $2 Bn Funding From SoftBank, Ant Financial, T Rowe Price

SUMMARY

US-based asset manager T Rowe Price could invest up to $200 Mn in Paytm

SoftBank, Ant Financial and Alibaba are also expected to participate in the round according to multiple reports

The round may value the company at $16 Bn

Noida-headquartered digital payments company Paytm is looking to amp up its arsenal with fresh funds in the increasingly competitive digital payments space. The company is looking to raise a fresh funding round of $2 Bn.

An ET report said that Paytm is in talks with US-based asset manager T Rowe Price will add up to $150 Mn-$200 Mn funding with Alibaba also joining the round, while another report from Bloomberg adds that existing investors SoftBank and Ant Financial are also expected to participate in the round. It adds that the company would be valued at $16 Bn post this funding round.

Currently, SoftBank owns a 19% stake in the company while Alibaba controls 38% stake of Paytm’s parent company One97 Communications. However, it is to be noted that Vijay Shekhar Sharma, founder, Paytm said that in August, an ESOP round valued Paytm at $15 Bn.

The company’s last funding was last year with $300 Mn from Berkshire Hathaway at a valuation of $10 Bn. Founded in 2010, Paytm is one of the first digital payment platforms in India. The company enables payments bank, credit cards, UPI for payments and transactions, ecommerce with Paytm Mall, event ticketing services, wealth management, insurance and gold services.

Paytm has close to 130 Mn monthly active users and more than 450 Mn registered users, as of July 2019. However, the company is struggling financially. One97 Communications posted an INR 3,959.6 Cr net loss for FY19 against INR 1,490 Cr a year earlier.

However, on Monday (October 14), Vikas Garg, deputy CFO, Paytm said that the company’s contribution margin has grown from a loss of 30% to profit of 12% of the revenue. Garg also said that the company has recorded a gross transaction value (GTV) of $100 Bn, up from GTV of over $50 Bn.

The company has also seen a 15% quarter-on-quarter growth for FY20. However, Paytm is currently a loss-making company with public listing ambitions and this has been hard luck for its investor, SoftBank.

Sharma had recently said that the company will start preparations for an initial public offering (IPO) within two years. Paytm chief said he wants the firm to generate more cash before entering the public market.

“I’d prefer to see a 5% reduction in margins right now, maybe 10% incremental, so maybe two years. I’m talking free cash, not profitability. I make money, but I’m looking to make free cash, and then I’ll go (for listing). When I’m comfortable issuing bonds that I can sell in five years, then I’ll go (for listing),” Sharma explained.

This coincides with Japanese conglomerate SoftBank’s chief Masayoshi Son’s lessons. Son in a private gathering of portfolio companies, last month, told chief executives to focus on profitability now and build the business accordingly. Will a fresh infusion help Paytm strengthen its game in the industry as well as IPO?