Razorpay is latest fintech unicorn

Payments gateway Razorpay has raised $100 million in its latest funding round led by Singapore’s sovereign wealth fund GIC and existing investor Sequoia India, joining the exclusive club of startups valued at more than a billion dollars.

Existing investors Ribbit Capital, Tiger Global, Y Combinator and Matrix Partners also participated in the Series D round. It has raised $206.5 million since inception in 2014, including $75 million in the previous round of fundraising last year.

Razorpay is the fifth Indian fintech firm to achieve ‘unicorn’ status after online payment gateway BillDesk, Flipkart-owned PhonePe and insurtech startup PolicyBazaar, which were all valued at over $1 billion in 2018.

Paytm entered the unicorn club back in 2014 and is the most valuable startup in the country at $16 billion.

Bengaluru-based Razorpay, with 1,300 employees, will be using the funds to launch products for its neo-banking business Razorpay X and lending business Razorpay Capital, seeking to double their growth in the coming year.

It will also hire 500 people across functions of growth, product and technology.

“GIC is a good long-term investor to have. Their knowledge about public markets and investment in firms like Bajaj Finserv Ltd and Bandhan Bank Ltd will help us in our journey to go public. With this fundraise, we will focus on going deeper into the Indian market and broaden our product portfolio to grow our business and achieve profitability,” said Harshil Mathur, chief executive and co-founder of Razorpay.

While the long-term aim for Razorpay is to go public, it will first focus on achieving overall profitability in 2-3 years. The startup will also focus on newer acquisitions in the business-to-business space and is in discussions with around five startups.

“It is too early to speak on which startups we are looking to acquire since these are still in the discussion phase. But we continue to look at inorganic avenues of growth through opportunistic acquisitions,” said Mathur.

The six-year-old startup provides payments and other financial infrastructure to help businesses manage money flow. Its core business continues to be its online payment gateway, which accounts for 80% of its revenue, as it serves five million customers, including Airtel, BookMyShow, Facebook India and Sony.

Its neo-banking and lending platform RazorpayX and Razorpay Capital, respectively, were launched in 2018.

Razorpay X allows users to open current accounts through two banking partners and provides employee management solutions relating to payrolls and has almost 10,000 businesses using the platform. It is looking to add invoice and expense management solutions to its existing offerings.

Razorpay Capital currently disburses ₹250 crore in loans every month, with the average ticket size ranging from ₹7 lakh to ₹10 lakh, for a duration of 3-6 months. The startup acts as a marketplace and works with five non-banking financial companies (NBFCs) and two banking partners, who provide loans to its customers.

Razorpay says that these new business lines will generate almost 35% of its revenue in the next year. By the end of this fiscal, Razorpay expects to have more than 10 million customers leveraging its payment gateway offering. The company launched its corporate credit card last year and plans to expand the offering to newer businesses and corporates.

Mathur said the company is planning to expand into South-Asian markets this year, but the plans are on hold due to covid.

India has more than 35 startup unicorns, with several existing ones raising funds this year. Edtech startup Unacademy, developer collaboration platform Postman and cosmetics and fashion marketplace Nykaa turned unicorns this year.