India’s Paytm secures $1b at a $16b valuation

Indian fintech leader Paytm said it has raised US$1 billion at a US$16 billion valuation in a round led by US-based asset management firm T Rowe Price.

T Rowe Price, along with Discovery Capital and D1 Capital, put in about US$400 million in the company, while existing investors SoftBank and Ant Financial poured US$200 million and US$400 million, respectively.

Photo credit: Sharaf Maksumov / 123RF

The company plans to use the new funds to amplify its merchant expansion efforts in both online and offline channels and focus on lending, insurance, and new-age banking, Paytm founder and CEO Vijay Shekhar Sharma told The Times of India.

“We are in the final process of applying for a general insurance license. On merchants’ side, we have 15 million of them and want to add 20 million more in the next two years,” he added.

Sharma also said Paytm will put an emphasis on its payment gateway business as it reduces spending on incentivizing peer-to-peer transactions on the Unified Payments Interface, a payment system developed by National Payments Corporation of India for inter-bank transactions. The head exec claims that the company has reduced its burn by about 35% to 40% during the last six months.

Paytm said it also looks to invest about US$1.4 million for the next three years to deepen its roots in India’s more rural markets.

Both Discovery and D1 previously bought shares of Paytm in secondary transactions, where existing shareholders sell their stakes to new investors.

As part of the transaction, SoftBank cannot sell its share for the next five years. If Paytm chooses to go public within this timeline, the Japanese conglomerate can either sell its shares or offer shares for other existing investors to buy, according to the report. SoftBank owns a roughly 20% stake in Paytm’s parent firm One97 Communications.

In September, One97 reported a net loss of around US$550 million for the financial year that ended March 31, up 165% from a US$207 million loss in the previous year. It mainly attributed the losses to its expenses for brand development and operations.