Paytm Has Pledged All Its Assets To Borrow Rs. 1,400 Crore From ICICI Bank

India’s largest payments company is getting creative while looking raise some payments for itself.

Paytm has pledged all its assets to be able to borrow Rs. 1,400 crore from ICICI Bank, Mint reports. The money will be used for its working capital needs. Paytm has pledged assets and mutual fund investments worth Rs. 7085 crore to be able to borrow the amount and boost its borrowing capacity. Thus far, Paytm had been able to borrow only Rs. 400 crore from ICICI for working capital requirements.

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Paytm’s move comes after tight liquidity conditions in markets, and banks’ unwillingness to lend to startups and financial service companies. Over the last few months, India has seen the share prices of several NBFCs, including Dewan Housing Finance and IndiaBulls plummet after it was feared that they’d be unwilling to make good on their bond payment requirements. 

Also, Paytm’s rising valuation means that it is hard to find equity buyers — the company was last valued at nearly $10 billion, which means that equity buyers are finding smaller and smaller stakes for the same amount they put it, which can make it hard to raise money. Paytm reportedly plans to use the borrowed money to fund its growing expansion plans, and its forays into the Offline to Online (O2O) business.

Some of Paytm’s recent bets, though, haven’t quite played out how the company would’ve hoped. Paytm has a handsome lead in the payments business, but is seeing greater competition from other UPI apps like GooglePay and PhonePe, which has meant 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 been required to stop adding new users for more than 6 months after it fell afoul of RBI guidelines, and the overall deposits too aren’t much to write home about. Paytm has also had to scale back operations on Paytm Mall — after the company cut back on cashbacks, it discovered that sales in some categories fell by as much as 90%, and Paytm Mall is now pivoting to a different offline to online model.

And while Paytm’s recently got some big-name investors on board — including Warren Buffett’s Berkshire Hathway — its losses are still spiraling. One97 Communications lost Rs. 1,600 last year, up from Rs. 900 crore the year prior, and Paytm Mall lost nearly Rs. 1800 crore with revenue of just around Rs. 800 crore. For now, Paytm’s still betting big, pledging its assets to raise further capital. But as recent events in India’s financial space have shown, it could be a tricky road to go down on.

 

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