Razorpay betting on omnichannel growth on road to IPO: Shashank Kumar

Fintech major Razorpay is bullish on an omni-channel approach for growth as it gears up to turn profitable ahead of its public listing in the next three years, co-founder and Managing Director Shashank Kumar told Business Standard.

According to Kumar, the company is heavily investing in its “omni-channel payments story” where it is building online and offline payment products across segments like marketing, and business finance, in addition to international expansion.

“The direct-to-consumer (D2C) retail market is growing at a rapid pace and is expected to reach $60 billion by FY27. We are looking to build specialised payment products for these businesses, be it online or offline, and want to keep tapping into the growth of that whole ecosystem around digital commerce,” he said.

In December 2023, Razorpay got the green light from the Reserve Bank of India (RBI) to operate as a payment aggregator (PA) and was allowed to onboard new merchants on its platform after almost two years.

As a result, the firm witnesses its “best quarter yet” in terms of revenue, gross merchandise value (GMV), and number of customers onboarded.

“We onboarded about 150,000 merchants in the first three months (of RBI nod). Typically, new merchants take time to contribute to the business. But that gave us an amazing push. We onboarded quite a lot of enterprise customers, as well. All our newer businesses, whether it be offline payments, or marketing products, are also doing well,” Kumar said.

Omni-channel opportunity

Razorpay’s omni-channel approach admittedly bolstered the firm’s operations and helped it navigate the RBI ban.

“Things did not get dire because, even during the embargo period, we kept launching new products. We launched almost 60 features last year. We focused our energy on what we could do. So, I think it was more of a slowdown, rather than a dire situation,” Kumar said.

Currently, as much as 70 per cent of the company's revenue is coming from online payments, around 10 per cent from its offline point-of-sale (POS) payments business, another 10 per cent from its neo-banking products like RazorpayX, and roughly 6-7 per cent from its newly developed marketing products like gift cards and loyalty offerings.

The remaining is contributed by the company’s international operations, which are currently in early stages.

Elaborating on Razorpay’s omni-channel strategy, Kumar said: “Most of the brands today have the opportunity for omni-channel growth, be it Mamaearth, Nykaa, Purpelle. A lot of offline brands also want to come online. There is a lot of customer pull happening. For this, payment systems need to be interoperable and present across channels. It's both an opportunity and a differentiator for us.”

Offline and international expansion

The firm’s offline POS business, perhaps, offers the biggest avenue for growth. To date, Razorpay has deployed around 500,000 POS devices, and about a million QR stickers.

“The offline payments business has the potential to equal the online payments. It is definitely a large opportunity,” Kumar said.

Kumar added that Razorpay’s current annual payment volume was about $150 billion, and the company had a target to reach $750 billion by 2030.

“We currently have about a three per cent market share in offline payments, and we want to get to over 10 per cent in the next two or three years,” he said.

In terms of international expansion, the company acquired a payment gateway licence to operate in Malaysia last year and has been focused on growth in that market. Beyond that, Kumar said that Razorpay was focusing on Southeast Asia and countries such as Singapore, the Philippines, and Thailand.

“We'll be launching in one or two of these countries in the next 12 months. We are still in the process of figuring that out – working with local partnerships and such, but that will be the focus area going forward,” Kumar added.

IPO prep

The company is in the process of shifting its domicile back to India from the US, which is expected to take place by the end of this financial year. Before going for an initial public offering (IPO), it will look to turn profitable on a consolidated basis – currently, only its core online payments business is in the green.

According to Kumar, the company is well-positioned for growth as it is well-capitalised and does not “burn a lot of cash.”

“While the startup ecosystem may be going through a funding winter, the broader economy, sectors like retail and e-commerce, are doing really well. So, we feel it's the right time to keep focusing on growth while getting closer to profitability. We will go for an IPO when it makes sense for the company,” Kumar said.