Razorpay’s valuation triples in six months on latest fundraise

Business payments and financial services startup Razorpay has raised $160 million as part of its Series E round co-led by existing investors, Singapore’s sovereign wealth fund GIC and Sequoia India, at a valuation of $3 billion. Last October, the firm had secured $100 million in a round led by GIC and Sequoia India at a valuation of a little over $1 billion.

Existing investors Ribbit Capital and Matrix Partners also participated in the current funding round. So far, the company has raised $366.5 million since its launch in 2014.

The valuation makes Razorpay the third-most valuable fintech firm in the Indian startup ecosystem.

Bengaluru-based PhonePe was valued at $5.5 billion during a funding round in December 2020, while One97 Communications Ltd, which owns Paytm, is valued at $16 billion.

With this fresh infusion, Razorpay will expand its footprint in South-east Asia, including the Philippines, Vietnam, Indonesia and Malaysia, to offer its core payment gateway service in these markets by the end of 2021.

Besides, Razorpay is also looking at acquiring software-as-a-service (SaaS) platforms and add capabilities such as treasury management, compliance-related remittances, business reconciliations and real-time reporting to expand its suite of products for small and medium enterprises (SMEs).

The company will use the fresh capital to boost its neo-banking business Razorpay X and its lending platform Razorpay Capital, which contribute nearly 30% of its revenue.

Both services were launched nearly two-and-a-half years ago.

“In the last year alone, we have on-boarded close to 700,000 merchants on our platform, and seen strong growth across our Razorpay X and Capital verticals. But there’s more work to be done; we believe there’s a dire need to develop new banking technologies that meet the rising demand. So, we plan to use the funds to further expand our banking and lending products,” said Harshil Mathur, chief executive officer and co-founder, Razorpay.

According to Mathur, Razorpay Capital has ramped up monthly credit disbursement from ₹300 crore to ₹800 crore through partners within a year. Over 15,000 merchants subscribe to Razorpay’s neo-banking solutions now, compared to 5,000 in the year-ago period.

The payments business, Razorpay, currently processes payments worth $35 billion annually, and plans to scale up to $50 billion by the end of 2021. It has close to 5 million small businesses as customers. Now, the Bengaluru-based startup, which has close to 1,300 employees, is in the process of hiring another 600 to boost growth.

“We will start going deeper in existing verticals of neo-banking and credit and look to provide tax-related payments, including compliance payouts, with a goal of creating a single app for businesses to manage their finances and payments,” Mathur said in an interview.

“For credit, our strategy remains to provide sachet-size loans and smaller tenure loans to small businesses, while increasing the frequency,” he added.

Razorpay claimed that its payments business continues to break even. The company expects its credit and neo-banking businesses to contribute to 50% of revenues in the next two-three years.

According to statistics from data intelligence platform Venture Intelligence, total investments in Indian startups during the first quarter of 2021 hit a two-year high of $4.2 billion. Till the first week of April, 10 startups attained a valuation of $1 billion or more.

Fintech startups including credit card bill payment platform Cred and investment platform Groww were the latest additions to India’s growing league of unicorns, achieving a valuation of $2.2 billion and $1 billion, respectively, earlier this month.