 "Razorpay eyes $750 billion P2M payments by 2030, says CFO Arpit Chug")
The startup, which is valued at over $7 billion, is intensifying its efforts to achieve profitability in all its businesses and move its domicile to India, as it is planning an initial public offering (IPO) in 2-3 years.
Fintech giant Razorpay is eyeing to capture a significant portion of India’s digital P2M (person-to-merchant) payments market and expects its payment volume to grow to about $750 billion by that time. The Bengaluru-based firm estimates that the country's P2M payments market will likely reach $4 trillion by 2030.
“We believe Razorpay could easily garner 15 per cent to 20 per cent of that market. We expect our payments volume could grow to $750 billion by 2030,” said Arpit Chug, chief financial officer, Razorpay.
Razorpay is an omnichannel payment and banking platform for businesses. Established in 2014, the company provides technology payment solutions to millions of businesses. These range from a Kirana shop in Kashmir collecting payments on its POS (point of sale) device to a textile exporter in Kanyakumari accepting dollars through its international payments product. Razorpay has already achieved an annualised Total Payment Volume (TPV) of $150 billion.
Razorpay reported consolidated revenue of Rs 2,279 crore in FY2023, up nearly 53 per cent year-on-year (Y-o-Y) from Rs 1,481 crore in FY22. This was mainly on account of a rise in enterprise and small and medium enterprise customers. It reported a net profit of Rs 7.3 crore for FY23. This was flat compared to Rs 7.2 crore posted in the previous financial year.
Its total expenses increased 54.6 per cent Y-o-Y to Rs 2,283 crore in FY23. Employee benefit expense contributed around 28 per cent of the total expenses at Rs 638 crore in FY23.
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Profitability
When asked about the profitability strategy, Chug said that Razorpay’s online payments business is already profitable. But the firm is also making investments in new areas such as expansion into international markets and scaling up of neo-banking. The firm is investing in new businesses such as RazorpayPOS and the business banking platform RazorpayX.
“We believe that, over the next couple of years, these businesses will organically move towards profitability,” said Chug, a former American Express executive.
In 2022, Razorpay acquired Ezetap, a leading offline Point-Of-Sale (POS) company, in a transaction valued at around $200 million.
Regarding improving efficiency in operations and keeping the burn rate at a minimum, Chug said the company has implemented various strategies. The firm has taken a measured approach to scale up its headcount.
“We've never had a situation where we needed to cut costs or (lay off) people,” said Chug. “We've generally been conservative on not hiring ahead of time or having an excess number of people and then worrying about that.”
Chug said the firm has also been very proactive in leveraging a lot of artificial intelligence tools to improve productivity.
It is also implementing AI-related tools to improve customer experience. The firm this year unveiled Ray, an AI assistant for e-commerce businesses that resolves issues related to payments, payouts, payroll, and vendor payments. It answers questions in English and Hindi and will soon be offered in regional languages too.
Razorpay is also using AI against fraud. It has launched AI-powered products that will reduce chargebacks and safeguard businesses from potential frauds and RTOs (return to origin), where the product fails to reach the customer.
IPO
Currently, the company’s payment business is profitable. It is intensifying its efforts to achieve profitability in all its businesses as it is planning an initial public offering (IPO) in 2-3 years. As part of those efforts, it has also initiated the process to move its parent entity to India from the United States.
“We have enough cash in the bank and have very patient investors. We are going about it (IPO) in a very thoughtful way and not rushing towards it,” said Chug. “Before we think about an IPO, we are focusing on consolidated profitability and domicile shift.”
Founded by alumni of IIT Roorkee, Shashank Kumar, and Harshil Mathur, Razorpay has raised a total funding of about $742 million from marquee investors such as TCV, GIC, Tiger Global and Peak XV. The startup was last valued at about $7.1 billion. Overall, it competes with players such as Pine Labs, PayU, JusPay, and BillDesk.
The company is also scaling up its efforts for international expansion. India's complex payments market and a tough regulatory ecosystem have emboldened Razorpay and are helping the fintech firm’s planned expansions into Southeast Asia and West Asia. Razorpay made its foray into Malaysia in 2022 and is already seeing huge traction there.
“The entire Southeast Asia market is at a (point) where India was 7-8 years ago. The experience in one market has given us a lot of confidence. You would hear about us going deeper into Southeast Asia in the coming years,” said Chug. “Another area of growth for us is supporting our India-based merchants who operate in these markets.”
Last year in December, the Reserve Bank of India (RBI) lifted a ban on Razorpay from onboarding newer merchants for its payment aggregator business. After the embargo was lifted, the company onboarded 1.5 lakh merchants in just a month and a half.
“We've had terrific growth in the last couple of quarters since then,” said Chug.