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3 minutes read

Paytm Borrows Rs 1400 Crore From ICICI Bank. See Why

| Published on February 17, 2019

In today’s era, there are several start-ups in our country but for being the best we need a strategy which makes it distinguishable from others. One97 Communications Ltd.’s Paytm does not call for any introduction in the world of startups.

India’s largest payment company is getting creative while looking for raising some payments for itself. Let us take a closer look at what is Paytm up to?

What happened?

Mint reported that Paytm has pledged all its assets to be able to borrow ₹1,400 crore from ICICI Bank. The money thus raised will be used for its working capital needs.

Paytm and ICICI Bank Ltd entered into an agreement under which Paytm’s current assets and mutual fund investments of worth ₹7,085 crore were hypothecated by the bank to boost the start-up’s borrowing capacity. Until now, Paytm could borrow up to ₹400 crore from ICICI for working capital requirements.

Why is it a strategic move?

Paytm takes this step only after tight liquidity conditions of markets and banks’ unwillingness to lend to start-ups and financial service companies. Paytm reportedly plans to use the borrowed money to fund its growing expansion plans and its forays into the Offline to Online (O20) business.

Recent bets of Paytm seem to have not been quite played out the way company would’ve hoped. Paytm has smartly ad the payments business, but sees greater competition from other UPI apps like GooglePay and PhonePe, which has meant that it’s not been able to make profits from its core payments operations.

Its bold Paytm Payments Bank gambit also appears to be floundering – after a much-hyped start, the bank had to stop adding new users for more than 6 months after it couldn’t comply with RBI guidelines.

Paytm had to also scale back operations on Paytm Mall – after the company cut back on cashbacks, it discovered that sale in some categories fell by as much as 90%, and Paytm Mall is now pivoting to a different offline to online model. Hopefully, Paytm gas some big-name investors on board – including Warren Buffett’s Berkshire Hathway – its losses are still intimidating. It lost ₹1,600 last year, up from ₹900 crore the year prior, and Paytm Mall lost nearly ₹1800 crore with revenue of just ₹800 crore.

To compensate for its losses Paytm has pledged its assets to raise further capital. Paytm even today tries to grow and bet bigger. Observing the recent events in India’s financial space, no conclusion can be brought to for Paytm’s move. It is just a tricky road to go down on as it totally depends on Paytm how strategically they will utilize the incoming funds.

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