Indian financial technology (fintech) giant Paytm has raised $1 billion in a new financing round led by US-based global asset manager T Rowe Price and backed by existing investors Ant Financial, SoftBank Vision Fund, and Discovery Capital, the company said Monday.
The Series G funding round values Paytm at about $16 billion and comes as the company is set to start preparations for an initial public offering (IPO) in the next 22-24 months.
Ant Financial contributed $400 million while SoftBank Vision Fund invested $200 million in the latest round. The financing sees Paytm outstripping fellow high-profile Asian startups such as Grab and Gojek in valuation and boosts the firm’s war chest to fend off an influx of new rivals.
As part of the latest transaction, SoftBank, which owns just about 20 per cent in Paytm parent One97 Communications, will not be able to sell its stake for the next five years unless the Indian fintech firm manages to go public. One97 Communications is India’s most valuable unicorn.
After five years and if Paytm remains private, the Masayoshi Son-led firm will have the option to sell its shares to existing investors.
The Economic Times reported last week that SoftBank had agreed to invest in Paytm’s latest $1-billion funding round on a condition that the Indian digital payments company should target to go public within the next five years from the time of completion of the transaction.
SoftBank first invested in Paytm in 2017. Alibaba Group, through Ant Financial and directly, owned 38 per cent of the company prior to the $1-billion funding round.
Paytm founder and CEO Vijay Shekhar Sharma earlier said that the company will consider listing only after 2021, when it is expected to start generating cash.
In an interview with Times of India, Sharma disclosed that the firm will use the fresh capital to partner with more online and offline merchants, adding to its 15-million strong merchant network.
The company will also make an aggressive push in the financial services business, with lending, insurance, and new-age banking as focus sectors. Sharma added that the firm is in the final process of applying for a general insurance licence.
The fresh capital positions Paytm as a major player in a potentially $1-trillion Indian payments market and protects its market share from new entrants, such as Facebook Inc, Alphabet Inc’s Google, and Flipkart’s Phone Pe.
Credit Suisse Group AG now estimates that the Indian digital payments market will touch $1 trillion by 2023 from about $200 billion currently.
Paytm has been in the market since early 2019 to raise funds, more than one year after it raised $300 million from Warren Buffet’s Berkshire Hathaway.
Paytm reached a milestone in August 2015 when it signed up 100 million wallet users, the first for any digital platform in India. Two years later, the platform hit 200 million users, sending its founder to the Time 100, a list of the world’s 100 most influential people.
Sharma announced in 2017 that Paytm will hit 500 million users by 2020. That could be a huge feat to achieve considering that digital wallets in India have lost their lustre and industry estimates showed only more than 100 million people in India today use mobile payments services. An article by the Morning Context described India’s digital wallet market as “dead.”