One-fourth the size of many competitors a year back, Razorpay is now a $1-billion startup

This round brings the total money raised by the company to $206.5 million.

For the Razorpay team, this feat means more responsibilities, more expectations from the market and no complacence behind the garb of being a startup.

In a press note, the company said it has witnessed a 300 percent growth over the last six months, when the entire country hunkered down because of COVID-19. This is an interesting factoid for a payment startup which depends on people to buy more.

How did Razorpay make it?

Ask cofounder Harshil Mathur. His prompt response is ‘speed’. Razorpay, since its inception, has always focussed on quick integration, and that has helped it boost its customer base when offline sellers wanted to move online quickly.

Given that the country is passing through one of the biggest consumption slumps in recent history, Razorpay must be doing something right for its business momentum to continue.

“We offer payment gateway integration in less than one day when the industry standard is 5-7 days,” Mathur told Moneycontrol.

No wonder, Razorpay got such massive incoming volumes, that it broke their queues for customer support queries.

“We brought it back up quickly and scaled up our customer acquisition channels rapidly,” Mathur added.

Today, Razorpay supports digital payments for 5 million merchants, up from a million a year back. It settles an annual payment volume run rate of $25 billion, up from $5 billion a year back.

“Their growth has been incredible, what they might be lacking in product experience, they have made up with a superior customer onboarding journey. Startups want to work with Razorpay,” said a top executive at a rival digital payment startup.

Humble beginnings

Razorpay was founded back in 2014 by two IIT Roorkee graduates, Harshil Mathur and Shashank  Kumar. They wanted to bring in a superior payment experience for internet businesses in India.

“Back then, there were not many companies offering products like Stripe, PayPal and others. So we knew that there is a great requirement for online sellers in India and we wanted to position Razorpay to fulfill that need,” said Mathur.

What started from a small apartment in Bengaluru has today grown into a multi-level office with staff count having gone up multi-fold, customers in the millions and settlement in billions of dollars. But it is the startup mindset in the company that has made it a winner.

“Shashank and I, we still share the same house where we had started Razorpay,” said Mathur, showing the bond the founders have and the commitment they have towards each other and the company.

The founders have worked hard to maintain the startup culture in the organisation even after five-and-a-half years.

Core principle

Payment is a difficult market to make money, especially when players like Billdesk which was last valued at close to $2billion, CCAvenue part of the listed ecommerce major Infibeam Avenues and Naspers backed PayU dominate the space. So, Razorpay purely relied on innovations.

“Even a year back, Razorpay was one-fourth the size of some of the largest payment players in the country. Today, it has shrunk the difference to less than 25 percent. This goes on to show how they have eaten into the market share,” said another top executive at a rival payments firm.

While quick integration systems have helped onboard new ecommerce clients, quick product launches helped them trump competition.

Mathur pointed out that they were the first in the market to bring in UPI on the payment gateway space.

“The first UPI integration in the market got us someone like Oyo, which was looking for this solution. Even Airtel still uses Razorpay for their app payments,” said Mathur.

Another major innovation they brought in was quick refunds, which got food-delivery major Swiggy to join them. For Swiggy, refunds were a big problem and Razorpay helped them address it.

Talk about their link-based payment offerings, where a customer is given an SMS link and instead of paying cash on delivery, he or she can receive the package and make instant payment online. This has brought in logistics players like Blue Dart to work with Razorpay.

“We have consistently launched new products before others. That has helped us get many large businesses which were working with competition before that,” he said.

The COVID boost

Digital payments slumped during COVID-19 and the ensuing lockdown. But Razorpay’s merchant acquisition “went through the roof”.

Focus on sectors which had minimum to no physical contact like edutech, gaming, and ecommerce helped Razorpay get many new customers.

With shopping malls and shops shut, consumers looked online to buy products. While traditional ecommerce players benefited, even offline sellers sniffed fresh business opportunities and started pushing their customers to their own websites.

Mathur said that Razorpay today powers many of these direct-to-consumer brands, like MamaEarth, Ubiquity, and Wildcraft, helping them collect online payments.

From small schools and restaurants to streetside grocers accepting orders through WhatsApp, everyone wanted digital payment solutions quickly and Razorpay could fulfill those demands.

The road ahead

Having aced the payments game, Razorpay now wants to expand into a banking partner for small businesses. It had launched RazorpayX or the neo-banking platform for SMEs, and Mathur said that it has done pretty well.

Since inception, the platform has around 10,000 businesses now, processes a billion dollar in payment volume and offers the entire range of banking services like debit cards, corporate credit cards, cheque books, vendor payments, salary payments and the like.

Through Razorpay Capital, the company extended business loans to around 8,000 businesses over the last six months and has hit a disbursal run rate of Rs 250 crore per month. It, typically, processes Rs 8-10 lakh loans for 3-6 months. Razorpay works with NBFC partners to process these loans.

“Investors have surely looked into the neo-banking business behind the valuation the company got,” said a startup founder who runs his own credit-card company.

Razorpay graduating into the unicorn club confirms the integrated play for fintech business models will be a sustainable business, according to Abhishek Chauhan, head - India consulting, RedSeer Consulting

“Razorpay diversifying into other fintech lines of businesses such as neobanking and lending will definitely be the key driver for future growth, thereby boosting its valuation, at par with the other homegrown fintech unicorns,” he added.

Eventually, the company will expand into tax payments, expense management and many other features on its neo-banking platform. In fact, the fresh funds will directly get into strengthening RazorpayX and Razorpay Capital.

Further, the Indian subsidiary of Razorpay has also reported a reduction of losses in the financial year 2019. As per data sourced from Tracxn, Razorpay Software has reported Rs 3 crore in a net loss in FY 2019 compared to Rs 12 crore in the previous year. FY 20 data has not been filed by the company yet.

By FY21, the company expects these businesses to contribute 35 percent to its overall revenue, with a 100 percent increase in the company’s count of partner businesses.

The funds raised will also be used towards hiring additional 500 employees by FY21, the press note added.

With a unicorn status, goodwill in the industry, a close-knit team and backers with deep pockets, Razorpay has got the perfect formula in place for building a successful startup. Now, as the Indian internet economy grows, Razorpay is set to bear the fruits.

Like Mathur always says: “We do well when our customers do well.” Now, given the pandemic and the overall digitisation push, it all seems to be playing out for the Kumar-Mathur duo.