T Rowe Price, others in talks to join Paytm’s $1bn round

Digbijay Mishra & Madhav Chanchani | TNN

Bengaluru: A consortium of leading US-based asset management firms and hedge funds T Rowe Price, D1 Capital and Discovery Capital are in talks to join a $1-billion round of funding in mobile payments company Paytm, two people aware of the matter said.

Paytm is also in talks to raise another $1 billion in debt as well, which will take the total size of the financing round to $2 billion.

After this financing — expected to close in one or two months — the Noida-based Paytm would be valued at $16-17 billion, depending on the total equity capital it raises from the investors. Both its large existing investors SoftBank and Alibaba group affiliate Ant Financial will be participating in this fund-raise. The latest round will further cement Paytm’s position as the most-valued startup in India. The size of capital these existing investors are putting in the company is not known yet.

The development comes at a time when US-based co-working major WeWork’s IPO debacle has raised serious questions over the soaring valuations at which companies are raising capital to scale up operations. In mature technology markets like the US, investors are seeking profitability plans from these emerging internet-based businesses. T Rowe Price has earlier backed Flipkart, which was acquired by Walmart last year.

For D1 Capital and Discovery Capital, this would be their first direct investment here apart from buying minority secondary shares from Paytm employees over a period. Discovery had backed startups like streaming major Spotify, while D1 Capital has backed e-grocery delivery startup Instacart.

For Paytm, it would be using the debt to have a major play in lending business, sources added. “These investors believe the potential of financial services is huge in India and Paytm’s leadership position in the consumer segment makes it a good bet for them. The idea of raising debt in this round is to make a serious play in lending business for its merchants (10-14 million),” one of the people quoted earlier said.

Emails sent to T Rowe Price, D1 Capital and Discovery Capital did not elicit any response, while a Paytm spokesperson declined to comment on the matter. For Paytm, its main rivals in payments business are PhonePe and Google Pay, especially on the fast-growing payments network Unified Payments Interface (UPI). In the offline market too, these companies are going after Paytm’s dominance among small- to medium-sized merchants. In its October 14 edition, TOI quoted Paytm founder Vijay Shekhar Sharma, who said he aims to cut operational losses by a third to at least $350-400 million (Rs 2,492-2,848 crore) this financial year as against $600 million (Rs 4,272 crore) at the end of March 2019. In comparison, Paytm parent One97 Communications’ revenue grew by just 6% to around $455 million (close to Rs 3,232 crore) at the end of March 2019.