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Paytm in talks with T Rowe Price for its funding round

The Vijay Shekhar Sharma-led company has been in the market since early this year to shore up funds amid mounting losses and growing competition in the digital payments sector.

, ET Bureau|
Updated: Oct 15, 2019, 08.26 AM IST
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SoftBank, which first invested in the company in 2017, holds a 19% stake, while the Alibaba Group, through Ant Financial and directly, owns 38% of One97 Communications.
Mumbai: Online payment services company Paytm is in talks with US asset manager T Rowe Price to lead a financing round aimed at raising $1 billion, according to two people privy to the matter.

The latest funding round may value Paytm at $13-15 billion, the people said.

“T Rowe Price is in talks to invest around $150-200 million, with existing investors SoftBank and Chinese ecommerce giant Alibaba expected to infuse the rest of the capital. Some Saudi-based funds may also join in,” said one person on condition of anonymity.

The Vijay Shekhar Sharma-led company has been in the market since early this year to shore up funds amid mounting losses and growing competition in the digital payments sector posed by Google Pay and Walmart-owned PhonePe.

The size of the funding round has been trimmed from the $2 billion that Noida-based One97 Communication, Paytm’s parent, had set out to raise, people said. ET first reported in its March 28 edition that Paytm was eyeing $1.5-2 billion in new capital. If the deal goes through, it will be a rare bet for T Rowe Price, which manages more than $1 trillion in assets, on a privately held Indian technology startup, after its investment in Flipkart.

Paytm’s Sharma and SoftBank did not comment on the new financing.

Emailed queries sent to T Rowe Price and Alibaba Group on Monday evening did not elicit a response till press time.

SoftBank, which first invested in the company in 2017, holds a 19% stake, while the Alibaba Group, through Ant Financial and directly, owns 38% of One97 Communications. People familiar with the development said Paytm may not see a significant bump up in valuation during the fundraising. The company was said to be valued at $16 billion in a secondary round earlier this year, although Paytm did not confirm this. A secondary sale is when an existing investor sells shares to another and the money does not come to the company.

Paytm’s last equity funding was in 2018, when Warren Buffett-led Berkshire Hathaway invested $300 million, ascribing a $10 billion valuation. It’s been tough going for Paytm in the previous year as losses widened in the previous financial year as revenue increased marginally. One97 Communications posted a ₹3,959.6 crore net loss for FY19 against ₹1,490 crore a year earlier, according to details the company shared with investors and as ET reported in September.

Besides the losses, a stream of top management executives quit and its ecommerce business under Paytm Mall was being audited by EY for a cashback scam.

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In recent media interactions, Sharma has stressed his company’s strategy to cut losses and turn profitable amid a rising chorus against the wave of cash-guzzling and moneylosing startups in India and Silicon Valley. Sharma has also spoken about apotential IPO. Paytm claims its margins are now growing positively and it has registered an increase in revenue across payments, commerce and financial services. The company has said it is moving away from the discount-led, peer-to-peer payments vertical to focussing on online and offline merchants. Cashbacks and subsidies have helped drive online payment transactions on the consumer side along with incentives to encourage adoption by merchants.

The effort to bolster its position on the merchant side comes when it has seen a sharp decline in Unified Payments Interface transactions and ceded market share to Google Pay and PhonePe. ET reported in July that Paytm clocked less than 140 million transactions on UPI, a big drop from its leadership position a few months ago, as Google Pay and PhonePe registered about 300 million transactions each.

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