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Earlier this year, Paytm began fundraising efforts to pick up close to $2 billion but trimmed the size of the round amid heated competition and widening losses in the digital payments segment.
India’s digital payments company Paytm said it got new funding from its shareholders but also some new investors. SoftBank Group Corp.’s Vision Fund, Ant Financial and Discovery Capital will, therefore, together with new investors advised by T. Rowe Price Group Inc. fund Paytm to get it in front of its competitors as the country’s finance sector is slightly beginning to grill.
From Ant Financial they said they have been searching for investment opportunities in Southeast Asia in order to enlarge its global effect and rise up its revenues. Ant Financial is the major stakeholder in Paytm with 38% while SoftBank owns 19%.
Paytm founder Vijay Shekhar Sharma is trying to fight off the competitors as are Google and Flipkart’s PhonePe that are all focusing on the younger generation of smartphone users who particularly tend to use new payment apps. As per Credit Suisse an app payments market could reach $1 trillion by 2023.
The company didn’t want to discuss details but it is known it has raised $1 billion in equity at a $16 billion valuation. According to the sources familiar with the matter, Paytm is currently in talks for another $1 billion in debt.
Paytm said it plans to spend approximately $1.4 billion during the next three years on expansion and that traders in more than 2,000 towns and cities are already using the company’s technology.
The truth is that India has become the fastest-growing market when we speak about the fintech sector. It even overtook China.
Even though $1 trillion seems like a small number compared with China’s $5 trillion industry, the fact that Chinese regulators blocked some huge international players including Facebook and Google, may help Paytm a lot.
However, according to some sources, the whole procedure has its terms. Paytm could be one of the first companies in which SoftBank will implement its new terms that the startup makes a written commitment to go public within a specified period. According to some still unconfirmed reports, SoftBank signed a deal with the parent company of Paytm One97 Communications, for further funding with the condition that the company files for an IPO in the next 5 years. An IPO in the Indian context would mean 3 years of the company’s profits.
This may seem too much but it’s the only way SoftBank can force the startups it has invested in, to start making profits. That also means that if Paytm fails to fulfill this condition, Softbank has the right to sell its stake, even to a competitor. However, in his recent interview, Vijay Shekhar Sharma said Paytm will remain private for the next 2 or 3 years. He also said Paytm is a dominating force in India and will continue dominating India’s mobile payments ecosystem. He explained Paytm Payments Bank has overtaken India’s No. 1 mobile bank, state-owned lender State Bank of India.
“Just like Ant Financial dominates payments in China, Paytm wants to dominate in India. We are getting into insurance and lending. We’ve created world-class tech that can be replicated both in emerging and developed markets. We built payments from the bottom up in Japan with Made in India technology. PayPay [a joint venture among Paytm, SoftBank, and Yahoo Japan] today has 10 million customers. We will go to the Americas and Europe.”
Be it as it may, talks regarding this deal are allegedly in their final stages but the terms still could change. The new funding could value Paytm at around $16 billion, taking over that of Southeast Asian tech unicorns taxi services Gojek and Grab.