Paytm set to raise $2 billion, valuation may rise 80% in a year

New Delhi: One97 Communication, the parent of online payments services firm Paytm, is set to raise $1.5-2 billion from existing investors SoftBank Vision Fund and Alibaba’s financial affiliate Ant Financial, the Economic Times reported citing people having knowledge of the development.

The latest financing round is likely to peg One97 Communications’ valuation at $16-18 billion, as much as 80% higher than last year’s valuation of $10 billion, when Warren Buffett-led Berkshire Hathaway invested $300 million.

According to the ET report, few months ago, the company was valued at $16 billion in a secondary round, in which an existing investor sold his shares to a new investor and the company did not get any cash. Some new investors may join in the latest round of fundraising, the publication mentioned citing people aware of the matter.

“While SoftBank and Ant Financial’s capital is already in, the company is engaging with other investors and may look to take the round to as much as $2 billion. But it is most likely to be an internal round,” the business daily quoted one of the persons cited above as saying.

Worth mentioning here is Paytm promoter Vijay Shekhar Sharma holds 15.5% stake in One97 Communication, SAIF and SoftBank hold 19.5% and 19% respectively while Alibaba Group, the biggest investor in the company, holds 38% stake. Berkshire Hathway, the latest investor in the company holds a 2.9% stake in the company.

The fast-growing digital payments market in India, which got a boost after demonetisation in late 2016, has helped Paytm scale up rapidly in India. Now to sustain the competition thrown by payments units of global giants Google and Amazon and Wallmart-owned Flipkart, Paytm needs significant investment. The capital to be raised in the next round will be used to fend off competition.

It may be noted that both PhonePe and Google Pay have clocked 180-190 million transactions on the UPI platform last month as against 221 million clocked by Paytm. According to an earlier ET report, PhonePe is also looking to raise $1 billion after being hived off from Flipkart which is expected to increase competition further.

“The payments battle in India is a global one with deep-pocketed players in the fray and Paytm investors understand that if they don’t double down now they may lag behind. Currently Paytm has shown market leadership but the lead needs to be maintained, which is why the capital raise is important,” an investor in the company told ET requesting anonymity. According to this investor, Ant Financial, which runs Alipay, will value Paytm at least 20% higher than at the last funding round.
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