Paytm, India's largest digital financial services provider, is close to raising funds for the second time in about five months. The Vijay Shekhar Sharma-led company is set to raise $2 billion from a group of existing investors at a pre-money valuation of $15 billion, a source in the know told Mint. The deal is close to being finalised.
The buzz is that China's Ant Financial, one of Paytm's earliest backers, and Japanese conglomerate Softbank Group Corp - which had pumped in $1.4 billion last year, the largest fund infusion by a single investor in a desi start-up - are among the investors. The funding will be split evenly between equity and debt, Bloomberg reported on Monday.
However, the news agency added that the deal will up Paytm's valuation to $16 billion. So, in the best case scenario for Sharma, the capital infusion will fan his company's value higher by close to 7 per cent from $15 billion currently. This was the valuation for the last investment round earlier this year when several employees liquidated their shares in the company through secondary sale. In August, Sharma told the daily that employees had sold ESOPs (employee stock ownership plan) worth $150 million to New York-based investors. Paytm was valued at $12 billion last year when Warren Buffett-controlled Berkshire invested $300 million in One97 Communications, Paytm's parent, for reportedly a 3 per cent stake in the digital payments platform.
The deal in the works is expected to help the company battle it out with rivals across various segments of its business. For instance, its leadership position in the payments business is under threat. Apart from deep-pocketed rivals like Flipkart-owned PhonePe and Google Pay, which are fast catching up, many new players like WhatsApp Payments and Reliance Jio and Amazon Pay are also eyeing India's $200 billion digital payment market, which is expected to mushroom to $1 trillion by 2023.
Meanwhile, Paytm has been burning cash at a rapid pace to fend off the competition. Last month, One97 reported a significant loss and a marginal increase in revenue in its annual report for FY19. On a consolidated basis that includes businesses like Paytm Money, Paytm Financial Services, Paytm Entertainment Services and others, the company reported a net loss of Rs 4,217 crore, up from Rs 1,604.34 crore a year ago. Losses in this period more than doubled.
The holding company's total revenue rose marginally by 8.2 per cent to Rs 3,579.67 crore in this period from Rs 3,309.61 crore a year ago, while its expenses nearly doubled to Rs 7,730.14 crore from Rs 4,864.53 crore in FY18.