Looks like India startups have suddenly become hot favourites for US tech giants. After the big announcement of Reliance Jio Facebook investment deal that took place last week, it’s time for Microsoft to invest in Paytm.
Paytm, one of the leading digital payments firm in India, is gearing up to knock its fintech competitors out of the park after allegedly holding talks with the global tech giant Microsoft in a bid to create a bigger war chest.
People who are directly involved in these talks, under the condition of anonymity, have made it known that the proposed fundraising amount is in the ballpark of $100 million. They have also mentioned that the proposed investment is most likely the extension of the $1 billion planned fundraising One97 Communications initiated last year.
According to people familiar with the matter, Microsoft began the talks with Paytm last year. However, back then the latter was already in the last leg of raising funds. Therefore, Microsoft couldn’t participate and that is why they are planning to plough in the cash into Paytm right now.
Last November, Paytm raised a whopping $1 billion in a financing round led by T.Rowe Price along with existing investors Ant Financial and SoftBank Vision Fund also participating in it. However, as per the regulatory filings of Paytm, only $720 million of the raised capital came through. As the newly introduced changes in FDI policy are in effect now, Alibaba’s affiliate Ant Financial, the largest investor in Paytm, will need the approval of Indian Government for their proposed investment – a part of $1 billion funds.
Earlier in the year 2017, Microsoft along with taking a wager on Flipkart also held fundraising discussions with Ola the ride-hailing app. The software giant also partnered up with the Mukesh Ambani led Reliance Jio for Azure – Microsoft’s cloud services offering – in August 2019.
Founded by Bill Gates, the Redmond, Washington-based Microsoft has been trying to capture the majority of the Indian market share when it comes to their cloud services against their main competitor and largest player in this segment Amazon Web Services aka AWS. As of right now, Paytm too is reliant on the AWS cloud services.
What Does Paytm Stand To Gain From Microsoft?
Paytm, the Gurgaon-based Vijay Shekhar Sharma led company stands to gain a lot from bringing onboard a heavyweight investor such as Microsoft. This is primarily because Paytm would very likely be given exclusive access to Microsoft’s connectivity, computing, and storage solutions.
Apart from this, if the alleged investment talk between Microsft And Paytm materialise it will help Paytm get a significant edge over their competitors in the digital payments space. As of now, Paytm has been seeming to lose a lot of ground when it comes to Unified Payments Interface (UPI) to its main competitors such as Google Pay and the Walmart-backed PhonPe.
Since the previous year, to jack up their revenues, Paytm has been focused on rolling out many new features such as subscription payments for its consumers and a payments infrastructure for their offline merchants. The company has also ventured into areas such as mutual funds, insurance, merchant and consumer lending, gaming, and advertising.
As of FY19, One97 Communications which is the holding company of Paytm, reported a net loss of Rs 3,959.6 crore against Rs 1,490 net loss it reported in the year before. On the other hand, when it comes to standalone revenue, in FY19 they reported Rs 3,319 crore which is only a marginal increase from the Rs 3,229 crore in standalone revenue they reported in the year before.
On the other hand, the arch-rival PhonePe, which is currently championing the UPI payments race, reported a loss of Rs 1,904.72 crore to post just Rs 184 crore in revenue from operations. At the same time, Amazon Pay, The third-largest player in digital payments in India, reported a loss of Rs 1,160.8 crore as well.
Now it remains to be seen how quickly can Microsoft solidify this deal with Paytm if it is to come through. As of right now, when both Paytm and Microsoft were reached out to about this possible development, neither of them had any comments. We will keep you posted on all future developments. Stay tuned.