Razorpay raises $375 mn, valuation vaults from $1 bn to $7.5 bn in 14 months

Razorpay Founders Harshil Mathur & Shashank Kumar

Digital payments and business banking platform Razorpay said it has raised $375 million in its Series F round of funding at a valuation of $7.5 billion, in what is its largest fundraise to date, more than all of its previous rounds put together. This is also more than double of its previous valuation of $3 billion that it achieved in only April this year, underscoring the huge momentum in the funding environment.

The round, led by Lone Pine Capital, Alkeon Capital and TCV also saw participation from US-based Growth Investor, and other existing investors such as Tiger Global, Sequoia Capital India, GIC and Y Combinator. This will also make Razorpay one the most valued fintechs in India, only behind Paytm, which is now listed on the public markets.

In an interview with Moneycontrol, Razorpay founder and CEO Harshil Mathur said the company will use the funds to scale up its neo banking arm RazorpayX and will also look at acquisitions.

“If there are companies that we can plug into our financial services ecosystem we will look at those. Business-to-business (B2B) SaaS (software as a service) is an area that is interesting, because those are the tools that we can plug into our offerings,” said Mathur.

The $375-million round brings the total amount of funds raised by the company to $741.5 million. While Razorpay raised $160 million in April this year at a valuation of $ 3 Billion, it raised $100 million in October 2020 at a valuation of $1 Billion, entering the unicorn club.

After the company’s Series E round, Mathur had said that the funds will be used for international expansion in South East Asian markets. However, the expansion plans are still underway and Razorpay has not used any of the funds from the previous round, added Mathur.

“Our burn rate is very low. We want to take the company public someday and we know the things that the market will look at. So, we have to build the company with that DNA,” he explained.

While Mathur did not disclose the burn rate numbers, Moneycontrol learned that it is in low-single digits in rupee million, most of which the company is deploying for research and development.

Globally, Razorpay is aiming to expand to two markets in the first half of 2022. The Bengaluru-based startup is still working on which markets it will begin with but growth markets such as Indonesia, Malaysia, Philippines, Vietnam etc. are on the radar, according to Mathur.

The big valuation number

At $7.5 billion, Razorpay has become the second most valued fintech in India after Paytm, which recently went public. The startup’s valuation has gone up 7x from $1 billion in just one year. What justifies this valuation?

Mathur said, “If the company looked overvalued, some of the investors would have thought about that. Especially the existing investors who came in at lower valuations. But all of them want to double down on their investment.”

Moneycontrol recently reported that the fintech was also in talks with Japanese investment giant Softbank, but talks did not fructify because the company had already held concrete talks with other investors before Softbank came in, according to people aware of the discussions.

Speaking about the investment, David Craver, Co-Chief Investment Officer at Lone Pine Capital said, “India’s B2B fintech sector is undergoing a period of rapid growth, and we are excited to partner with Razorpay, which has been at the forefront of creating resilient, innovative products to anticipate and address the changing needs of businesses.”

The company recently crossed $60 billion in Total Payment Volumes (TPV) and is aiming for $90 billion in 2022. TPV refers to the total value of payments and reversals executed on a payments platform, in this case across Razorpay's payment gateway, neobank, and other products.

While payments are currently the largest revenue driver for Razorpay, in the coming years Mathur expects payments to contribute around 45 percent with the rest coming from lending and neo banking services.

“With a broad set of products across payments, banking, and software that provide a seamless end-to-end experience for merchants (who have been historically underserved by legacy payment providers) and geographic expansion on the horizon, we are thrilled to be partnering with Harshil, Shashank and his team who have continued to execute on their vision,” said Deepak Ravichandran, General Partner at Alkeon Capital.

In the Indian payments gateway landscape, Razorpay competes with the likes of PayU, BillDesk and Paytm, among others. The startup will also see competition heating up as Irish-American payments infrastructure provider Stripe is now gearing up to expand its offerings in India.

However, according to Mathur, Razorpay is the largest payments service provider when it comes to internet companies in India. Startups too are increasingly using the company’s payroll and neo banking services with 34 of the 43 unicorns that emerged in 2021 using the platform, he added.

Founded in 2014 by IIT Roorkee graduates Mathur and Shashank Kumar, Razorpay's clients include Facebook, Ola, Zomato, Swiggy, Cred, Muthoot Finance, National Pension System and Indian Oil, among others. The company is aiming to grow the number of online merchants who use its services to 10 million by 2022 from the current 8 million.