Razorpay can go public in a few years without raising more funds
By Team Startupcity | Monday, 14 November 2022, 09:23 IST
Razorpay, winner in the prestigious Startup of the Year category Startup Awards 2022, is looking to go public over the next two to three years and does not need to raise any more capital as it continues to grow revenue by 100% annually, its founders Harshil Mathur and Shashank Kumar said in an interview. They said the company won’t need more capital for operations unless it spots a major strategic requirement for the business.
Valued at $7.5 billion, the fintech firm has already surpassed its annual gross transaction value (GTV) target of $90 billion for this year, hitting the $100 billion mark even as online businesses are starting to see a slowdown. Mathur, its CEO, said while the tech world is in the throes of a slowdown, the broader India ecosystem is not seeing a dip in consumption, leading to growth in digital payments from sectors like education, travel and others. The Bengaluru-based fintech firm is also expanding aggressively into offline payments following its acquisition of Ezetap earlier in the year.
“Our payments business is almost breaking even. We are fairly ready if we were to just go public as a payments company. But we will be doing injustice to the vision that we have if we go public just as a payments company,” Mathur said. “There are a lot of aspects on credit, banking and now offline that we will get to connect together and the synergies of the platform will be far higher. We want to spend the next couple of years taking them to a point where they are also breaking even and then go public.”
Kumar also said Razorpay wants to go public with its payments, credit and neo-banking story to investors and its international and offline payments along with it. “The markets will also understand that much better. Business-to-business (B2B) payments and fintech is a slightly complex ecosystem. Unless we have proof, it will be hard to demonstrate how these things connect together,” Mathur said, adding that the company is also considering its options in terms of moving its headquarters. Razorpay’s parent firm is domiciled in the US.
Consumer-focused payments firms like Paytm and Policybazaar went public last year, listing on the Indian bourses, but are trading 60-70% below their issue price owing to multiple factors, including investors questioning their ability to make profits. Razorpay, which raised over $535 million last year, will still prioritise growth in the coming years and not over-optimise further on profitability, the founders said.
On the much-talked-about collapse of the $4.7 billion Prosus-BillDesk deal, Mathur said, “As long as we create our differentiation for ourselves on tech and servicing, it doesn’t matter what happens in the ecosystem." If the deal had closed as planned a year earlier, the BillDesk and Prosus-owned PayU combine would have been the largest payments processor in the country. While Razorpay’s payments business will grow at 100%, its gross merchandise value, or GMV, from new verticals like neo-banking, payroll management and others are expected to grow three- to four-fold, according to Kumar. Razorpay’s payments unit still constitutes about 80% of the entire business, Mathur said.
“During the pandemic, the growth was coming more in-bound, where it didn’t require much marketing spends or effort from us. But we are still growing now at 100% (in terms of revenues) in a non-covid year. And we expect to maintain a similar growth rate in the next two to three years. And 80% of our business is online payments. Our GMV growth would be much higher,” he said, adding Razorpay will continue its growth rate as the compound annual growth rate (CAGR) of the payment industry is still very high, with a lot of non-internet payments businesses still going digital.
Razorpay’s payments unit reported revenue of nearly Rs 1,485 crore in FY22 compared to Rs 841 crore a year ago, as per its unaudited financials. The company recorded a net profit of Rs 7 crore on a standalone basis in FY21 and clocked a profit (undisclosed) in FY22 as well. Asked if Razorpay was concerned about its high valuation amid the ongoing correction in startup valuations, Mathur said they have built a sustainable business and that helps them to not be at the mercy of the market. “For us our valuation is neither a cause for celebration nor a cause for concern. Funding does not drive our business and the advantage of B2B is that it is built in a sustainable fashion and we are not dependent on just fund infusions,” Mathur said.
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