Razorpay’s Path Towards An Indian IPO Listing; CEO Assures Preparedness For Domiciling To India By End Of FY25

Merchant-focused payments provider Razorpay, under the leadership of co-founder and chief executive Harshil Mathur, is strategically aligning its trajectory towards profitability across all business lines within the next two years.

Mathur articulated the company’s vision, indicating that once this milestone is achieved, Razorpay would contemplate listing on the Indian bourses.

Razorpay recently got approval to onboard new merchants; hence, it now wants to focus on attaining profitability in its diverse business verticals.

However, Mathur emphasized that before embarking on the IPO journey, it would be essential for each segment to break even and contribute positively to the company’s financial health.

Notably, the online payments division, constituting 75% of Razorpay’s revenues, has already achieved breakeven, signifying a significant milestone in the company’s financial roadmap.

The Steps Before The IPO Dream
However, Razorpay’s plans for a domestic public listing are intricately linked with its domicile shift back to India by the end of FY25.

The strategic move, as reported, entails a substantial tax liability in the US, estimated between $250 to $300 million. However, despite the looming tax burden, Mathur stressed that Razorpay’s prudent financial management, buoyed by a robust cash reserve, has enabled it to sustain day-to-day operations without significant burn.

Mathur elucidated that Razorpay has meticulously prepared for the shift, accounting for the tax implications while ensuring a healthy financial position without the necessity of immediate fundraising.

Likewise, having submitted the requisite documentation, It now awaits regulatory approvals from both the US and India.

Nevertheless, the transition process is anticipated to exert pressure on Razorpay’s cash reserves, especially amidst the prevailing funding constraints in the startup ecosystem.

The timing of the IPO hinges on the seamless execution of the domicile shift, with Mathur expressing optimism in completing the process before the close of FY25.

The Positives
Razorpay’s unprecedented journey is underpinned by substantial funding, having raised $741.5 million to date.

The latest funding round in December 2021, led by prominent investors such as Lone Pine Capital, Alkeon Capital, and TCV, further helped solidify the company’s valuation at $7.5 billion, reinforcing investor confidence in its growth trajectory.

What’s On The Horizon
In digital payments, Razorpay continues its stride by introducing novel products centred around online transactions and expresses confidence in regaining approximately 70% of the customers lost last year.

Harshil Mathur, CEO of Razorpay, asserts, “Our projection indicates that within the next six months, over 70% of the merchants we lost last year will return to the Razorpay platform. That remains our primary focus.”

Following a year-long prohibition, the Reserve Bank of India (RBI) lifted the ban on Razorpay in December, allowing the firm to onboard new merchants for its Payment Gateway (PG) business.

Cashfree, a competitor of Razorpay, also received the green light to onboard new businesses.

Mathur reveals that within the initial two weeks, Razorpay witnessed a surge of 60,000 to 70,000 new merchant signups on the platform and successfully onboarded around 10,000 new merchants within a week of reinstating the onboarding process.

“Our monthly signups now triple the pre-embargo numbers, and we are consistently maintaining similar momentum,” Mathur adds.
Currently, the company processes an annualized payment value of $150 billion across its payment products.

Despite enduring a year-long embargo on new merchant signups, leading payment gateways in India, including Razorpay, aim to sustain revenue growth in FY24, Mathur affirms.

New products
Recently, Razorpay introduced its Payment Gateway 3.0 product, boasting additional features like an Artificial Intelligence stack to streamline checkout steps and enhance conversion rates for online businesses.

Razorpay offers smaller businesses a buyer-protection badge through this enhanced PG stack, fostering increased customer confidence in transactions on these platforms.

Moreover, the new PG offering seamlessly integrates with its Ezetap point-of-sale (PoS) solutions, enabling online shoppers to explore nearby offline stores, test products, and make purchases.

Razorpay also launched a dynamic quick-response (QR) code and contactless tap card payments PoS device in offline payments.

Additionally, the company has initiated into the loyalty and rewards management sector by unveiling its marketing stack, Razorpay Engage HQ. By leveraging its 2022 acquisition of Poshvine, Engage HQ facilitates brands in offering personalized incentives to customers both online and in-store.

With these recent launches, Razorpay is strategically aligning its online and offline payment segments, ensuring seamless customer experiences across both channels.

Mathur notes that due to this diversification, approximately 35% of Razorpay’s user base have opted for value-added products beyond the PG offering.

The Last Bit: Despite challenges, a relatively slow economy, and a dip in investor funding, including a year-long embargo on new merchant signups, Razorpay is well on the path towards remaining steadfast in its commitment to regain lost ground and driving revenue growth and a potential IPO listing.

Likewise, with a slew of new product launches and strategic initiatives, Razorpay is not only bolstering its core payment gateway business but also venturing into new territories, looking for sustained profitability and market leadership.