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With more funds in kitty, Paytm plans to invest $1.39 billion in next 3 years

Vijay Shekhar Sharma

India’s leading FinTech and mobile commerce company Paytm, owned by One97 Communications Ltd, has raised a fresh round of $1 billion investment from US-based asset manager T Rowe Price Associates, Inc. along with Japan’s SoftBank Group and China’s Ant Financial. Discover Capital, an existing shareholder, also participated in the financing round that takes the company’s valuation to $16 billion.

Japan’s SoftBank Vision Fund, which invested around $200 million in the Series G round and owns about 20% in Paytm’s parent company, has pumped in fresh equity on a condition that the company should go public within five years.

Paytm’s founder Vijay Shekhar Sharma announced about the recent funding on Twitter and said, “Today, we open the next chapter in Paytm’s journey of India’s financial inclusion. We commit to investing additional ₹10,000 crore (INR 100 billion or $1) to serve financially unserved/underserved.”

Financial Inclusion

The company’s blog further added that Paytm will use the funds for expanding its offerings in consumer internet and bringing new-age financial services such as lending, insurance, investments, stockbroking to the masses. The company is also working to strengthen the user engagement with content services under ‘Paytm Inbox’ that offers games, news, videos and more, the blog said adding that the INR 100 billion would be invested over the next three years.

Paytm, which has pioneered the concept of mobile wallets in India and introduced QR-code technology in local shops and retailers, is currently, serving merchants in over 2000 towns and cities spanning across 650 districts in the country with an aim to bring low-cost mobile-enabled financial services to rural India.

The company, in which American business magnate Warren Buffet is also an investor, with the fresh funds in its kitty has so far raised over $3 billion since its inception in 2010 despite the fact that the company has been posting huge losses year after year.

Financial losses

According to data sourced from business intelligence platform Tofler, Paytm’s consolidated net loss widened at INR 42 billion in the Indian financial year ending March 2019 from INR 16 billion in the year-ago period. Meanwhile, its parent entity One 97 Communications reported a 165% hike in its net losses with INR 39.5 billion in fiscal 2019. However, the company’s revenue has not been growing at a similar rate as Indian consumers are ditching mobile wallets to adopt government-backed UPI (unified payment interface) payment, which is at present free and can be carried out from a mobile banking app. Internet giant Google, sensing the massive opportunity in the Indian digital payments space, had launched Google Pay in September 2017 with UPI and has already garnered a majority market share in that segment.

According to data provided by the payments service provider and gateway Razorpay, In October, UPI was responsible for 50% of transactions on Razorpay’s platform–surpassing cards by a 15% margin. It further added that Google Pay led the digital payment landscape with 61.19% of UPI transactions followed by PhonePe as a strong contender with a contribution of 24.95%. Paytm was way behind at 5 per cent.  In India, digital payments have climbed more than five times since 2015 to 22.4 transactions per person in the year ended 31 March, according to data provided by the Reserve Bank of India and are expected to grow at a faster rate.

Looking beyond payments and markets

However, Paytm does not seem to be much bothered as it looks just beyond mobile payments and the Indian market. The Jack Ma-mentored company has launched operations in Canada and Japan and is eyeing the US market. The company has also entered the wealth management category and plans to become a comprehensive financial services firm with offerings ranging from mutual funds to insurance to other personal finance instruments.


The story has been updated with some more details. 

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