Paytm raises $1.4billion funding from SoftBank
BIG DEAL Paytm plans to acquire 500 million new customers using the funds
NEW DELHI: Paytm, run by One97 Communications Ltd, said it has raised $1.4 billion from SoftBank Group Corp in one of the largest funding rounds by a single investor; making the payments firm the biggest investment for the Japanese conglomerate in the Indian start-up ecosystem.
SoftBank, which has not seen too many successful investments in its India portfolio, is now banking on Paytm’s payments business to replicate Alipay’s (Alibaba Group’s financial business) success in China. Mint first reported about Softbank’s investment into Paytm on April 19.
Paytm plans to invest about $1.6 billion (about ₹10,000 crore) over the next three to five years towards enabling half a billion Indians to join the mainstream economy, the company said in a statement on Thursday. “As a part of this vision, the company will soon launch the Paytm Payments Bank, a mobile-first product that will reach every corner of the nation, and focus on the millions of unserved and underserved Indians,” it added.
Paytm, India’s second-most valuable Internet firm, will use the money to acquire new 500 million customers and launch a slew of financial services products such as wealth management and money lending, among others.
While the firms with payments bank licenses are not allowed to lend on their own, Paytm has tied up with financial institutions including banks like ICICI, Bank of Baroda and start-ups such as Capital First, Capital Float to lend to customers on their behalf.
“This business will require a lot of capital before it can start generating cash and so we need long-term investors like SoftBank and Alibaba,” said Sharma in a telephonic interview.
“In line with the Indian government’s vision to promote digital inclusion, we are committed to transforming the lives of hundreds of millions of Indian consumers and merchants by providing them digital access to a broad array of financial services, including mobile payments. We are excited to partner with Paytm in this journey and will provide them with all our support,” said Masayoshi Son, chairman and CEO, SoftBank Group Corp.
One97 Comm shelters Paytm’s mobile wallet business including travel booking, movie ticketing etc and payments bank business which is set to be launched on May 23. The company recently spun off its e-commerce business PaytmMall under a separate entity Paytm E-commerce Pvt Ltd and counts Alibaba Group, Alipay, SAIF Partners and Sharma as shareholders.
Getting SoftBank on board as a large shareholder will help Paytm have a long-term investor on its capital table and also help reduce the control of China’s Alibaba Group Holding Ltd, currently its largest shareholder. This will help Paytm pre-empt possible government concerns about a Chinese company having a strong hold on Paytm and the financial services sector, considered a strategically important sector.
Investor interest in Paytm, the top online payment services provider in India, has increased after demonetisation. The company move to launch zero cost QR Code-based payment solution worked very well during the demonetisation days and has been adopted by millions of merchants since then. Paytm’s consequent emphasis on digital payments and a strong branding and advertising campaign to build the brand have worked well.
Paytm was launched in August 2010 as an online recharges and bill payments platform and soon expanded into online commerce and mobile payments through wallets. In January 2014, it launched the Paytm Wallet, currently the largest digital wallet with over 220 million users and is accepted by over 5 million offline merchants across India.