Mumbai: Vijay Shekhar Sharma's One97 Communications Ltd, the parent of fintech startup Paytm, has pledged all its current assets and mutual fund investments to be able to borrow ₹1,400 crore for working capital needs from ICICI Bank Ltd.
On 18 January, Paytm and ICICI Bank Ltd entered into an agreement under which One97 Communications’ entire current assets worth ₹7,085.1 crore as on 31 March 2018 was hypothecated by the bank to boost the startup’s borrowing capacity. Until now, Paytm could borrow up to ₹400 crore from the bank for working capital.
The higher borrowing limit helps Paytm secure capital for everyday operations amid tight liquidity conditions in the market and banks’ unwillingness to lend to startups and financial services companies. It may also help Paytm fuel its growth plans that primarily include online-to-offline (O2O) retail businesses and enter new overseas markets in the digital payments space—moves that are aimed at narrowing losses. The agreement was formally registered with the ministry of corporate affairs on Wednesday.
Mint has reviewed a copy of the documents.
“One97 Communications has clear goals. Several attractive deals are on the table and even if there is a difficulty to get an equity buyer due to the cost of stake in a large-scale startup such as One97, the company’s plans should not suffer due to shortage of working capital limits," said a person with direct knowledge of the development.
In a recent share-swap deal (registered with MCA on 18 January), involving issuance of shares by One97 Communications to acquire stakes of Gamnat Pte. Ltd and SAIF Partners India IV Ltd in Little Internet Pvt. Ltd, a unit of One97 Communications, the firm was given an enterprise value of ₹44,893.29 crore by Corporate Professionals Capital Pvt. Ltd, the appointed valuer for the deal.
On 24 January, at the World Economic Forum in Davos, One97 Communications’ chief financial officer Madhur Deora said Paytm is considering foraying into one or two more developed markets in 2019.
While the company can’t commit to a definite launch in other markets, it is working on building a scalable business, Deora said.
In August, billionaire investor Warren Buffet’s Berkshire Hathaway Inc. bought a $356 million stake in One97 Communications.
Paytm recently hired Raghu Chakravarthi from online grocery retailer BigBasket to help with its O2O strategy.
Over the past few years, Paytm group has been losing more money in its online retail business as compared to digital payments, where it is the market leader.
Paytm’s online retail business Paytm Mall, under Paytm E-Commerce Pvt. Ltd, saw its financials deteriorating with a loss of ₹1,787.55 crore on a total revenue of ₹774.86 crore during FY18, according to filings with the registrar of companies.
Paytm has been expanding its businesses rapidly over the past one year.
On 22 October, it launched a barcode-based smartphone payment service called PayPay in Japan, in a joint venture with SoftBank Group Corp. and Yahoo Japan Corp.
On 30 January, Paytm acquired a hotel booking app called NightStay that allows travellers to book hotels instantly.
With the ₹142 crore acquisition of NightStay, Paytm is looking to re-enter the hotel aggregation business and expand its travel operations by offering last-minute deals to tourists especially in the mid-to-upper range hotel booking segment.
Paytm has already tied up with at least 5,000 hotels across the budget, luxury and business segments.
One97 Communications’ total losses during the fiscal year 2018 almost doubled to ₹1,604.34 crore from around ₹899.64 crore in the previous year.