Payments company Razorpay has closed a $100 million financing round co-led by GIC, the sovereign wealth fund of Singapore, and existing investor Sequoia Capital, in the process topping $1 billion in valuation, and becoming the first Indian neo-bank to hit that benchmark.
Existing investors of Bengaluru-headquartered Razorpay, which includes Palo Alto-based financial services-focused investment firm Ribbit Capital, New York-headquartered Tiger Global Management, famed Silicon Valley-based startup accelerator Y Combinator and top-tier domestic venture capital firm Matrix Partners India, have also participated in the latest equity financing round.
Razorpay was founded by IIT Roorkee alums Harshil Mathur and Shashank Kumar in 2014.
GIC’s investment in Razorpay follows its Rs 5,512.50 investment in Mukesh Ambani-led Reliance Retail earlier this month, which saw the government of Singapore-owned sovereign wealth fund pick up a 1.22% stake in the domestic retail giant. It has also been an investor in SoftBank-backed ride-hailing major Ola, Walmart-owned Flipkart, India’s largest ecommerce company, as well as in banking institutions, Kotak Mahindra Bank, Bandhan Bank and Axis Bank, among others.
“India has made significant strides in establishing a digital payments ecosystem and Razorpay has established itself as a clear leader, with its strong focus on customer experience and product innovation. GIC has a long track record of partnering with leading fintech companies globally and is delighted to partner with Razorpay in its journey to transform payments and banking,” Choo Yong Cheen, chief investment officer for private equity at GIC, said in a statement.
The round is completely primary in nature, according to Mathur, with the proceeds being utilised towards further building RazorpayX, it’s business banking platform and Razorpay Capital, it’s SME-focussed lending platform. Till date, the company has raised about $206.5 million in funding across rounds.
“Both RazorpayX and Razorpay Capital have seen very good traction. The first focus area is to go deeper and build more products around these. The payments business is almost breaking even, and that does not require that much funding. We need to put more fuel into the fire, and that’s where a significant portion of the capital will go towards,” Mathur told ET, adding that the company will continue to hire more people, while also targeting acquisitions and investments across the broader fintech domain.
The company will focus on rolling out products related to vendor management, invoice management, tax payment and expense management for RazorpayX. It plans to hire more personnel for its product, engineering and design teams.
“India’s digital ecosystem is seeing unprecedented growth with online shoppers expected to cross 350 million by 2025. This trend of digitisation is penetrating India across social strata and geography and Razorpay is playing a pivotal role in this transformation by enabling millions of merchants to accept digital payments in a frictionless and efficient manner. They have expanded the breadth of products and solutions rapidly across payments and banking and are becoming a platform for all financial technology needs of their customers,” Ishaan Mittal, principal, Sequoia Capital India, said.
While Mathur did not disclose the names of any potential acquisition or investment targets, he did state that the company had held discussions on the same, with an eye for B2B SaaS companies.
“We are in discussions with a couple of companies already. But we are also fairly open to talks with B2B SaaS companies to come and build on top of Razorpay,” the CEO of Razorpay said.
According to him, on an annualised basis, Razorpay is processing payment volumes of more than $400 billion, with RazorpayX and Razorpay Capital contributing 15%-20% to its overall topline. In the next two years, Mathur is projecting 35%-40% of its overall revenue coming from these two arms. On the lending side, the company is currently disbursing loans of Rs 250-300 crore every month.
“We will power payments and banking for 50 million businesses by 2025. We will continue to make an impactful contribution to the growth of the industry, aid adoption in the under-served markets and drive new practices and a new thinking for the industry to follow. And this investment fits perfectly with our growth strategy,” Mathur said.