Razorpay’s valuation rises to $7.5 billion after $375-million funding

Razorpay has raised $375 million (Rs 2,850 crore) in a new funding round led by US-based investors TCV, Lone Pine Capital and Alkeon Capital, after which its valuation has grown to $7.5 billion—a jump of two-and-a-half times in eight months.

The Bengaluru-based payments gateway platform had in April this year
raised $160 million at a post-money valuation of $3 billion. The company has seen a seven-fold increase in its valuation in a little over a year
since it turned unicorn.

ET reported in its November 10 edition that TCV, an investor in Netflix and Airbnb,
was in talks with Razorpay to participate in the new funding round.

Razorpay has been one of the major beneficiaries of the pandemic-induced acceleration in digital payments, as a majority of its merchants clocked fast-paced growth since the virus outbreak in the country.

While initially the new funding round was being finalised at ~$250 million at a valuation of $6-6.5 billion, the increased investor interest over Razorpay’s growth in core business as well as its neobanking platform led to the funding round getting increased to $375 million, a person briefed on the matter said. With this, Razorpay has become one of the most valued startups in India and has raised $741.5 million so far.

Harshil Mathur, cofounder and chief executive officer of Razorpay, said the participation of these investors is a significant validation for the seven-year-old firm, something that will be advantageous when it approaches a potential initial public offering over the next 2-3 years. Razorpay’s existing investors like Tiger Global, Sequoia Capital India, GIC and Y Combinator have also participated in this round, the company said.

According to Mathur, the fresh funding will also help the startup become a full-stack financial solutions firm as it looks to invest in its neobanking platform, fuel acquisitions, enter overseas markets and grow its payments gateway business.

“We have become the de-facto choice for business (payments solutions). We went from five million to eight million merchants as many internet businesses are scaling very fast and they are getting funded to grow further,” Mathur said in an interaction with ET. “Neobanking banking is really scaling for us and all our offerings are now starting to come together (at a scale). We now have 25,000 users who use our banking suite service. This is a new industry we have created working with internet-first brands, early-stage startups.”

Started by IIT Roorkee alumnus Mathur and Shashank Kumar, Razorpay started life as a payments gateway focusing on new economy firms. It now has a neobanking platform called RazorpayX, which offers lending, business banking solutions, payroll management and other services.

Recently, Razorpay said it has set a target of total payment volume (TPV) on its platform to hit $90 billion by the end of next year. This was preceded by the company clocking a 20% higher TPV this year at $60 billion, compared with its initial plan of $50 billion. This is 300% year-on-year growth for the second consecutive year, the company said.

The new Razorpay funding comes after the $4.7-billion merger of Prosus’ fintech unit PayU and BillDesk in August. The combined entity of BillDesk and PayU are estimated to have an annual total payment volume (TPV) of $147 billion.

Razorpay, a dominant payment processor for new-age digital businesses, is now the last of the large-sized standalone payments firms in the sector after the PayU-BillDesk merger.

The Y Combinator alumnus’ lending vertical is now disbursing around Rs 600-800 crore per month. It started lending to merchants largely for their working capital needs but is now focusing on issuing corporate credit cards to these businesses.

“We are issuing 200-300 corporate credit cards per month now compared to 50 earlier this year. This can be much more scalable as well,” Mathur said.

As far as global expansion plans are concerned, Razorpay is eyeing the Southeast Asian market first. Mathur said part of the new capital will go for investments in overseas markets as it requires setting up entities, applying for licences and building a presence in a country.

While the company has done product-related small acquisitions in the past, Mathur said he is looking at potential M&A of business-to-business (B2B) software-as-a-service (SaaS) firms in the financial solutions space to widen its array of offerings and strengthen existing products. “They (acquisitions) could be significant in size,” he added.

“We think they (Razorpay) are building the next-generation payments and banking platform in India, and we look forward to supporting them on their mission and future expansion,” said John Doran, general partner at TCV. Earlier this year,
TCV backed Dream Sports, the parent of online fantasy gaming platform Dream11.