Razorpay set for confidential IPO filing at $5B valuation
What's the story
Razorpay, a leading fintech unicorn, is gearing up to confidentially file for an initial public offering (IPO) in the coming weeks, according to The Economic Times. The company hopes to raise between $600 million and $700 million through the IPO. It is expected that Razorpay's valuation will be between $5-6 billion, which is lower than its peak valuation of $7.5 billion over four years ago.
Filing approach
Adopting confidential filing strategy for IPO
Razorpay intends to use the confidential filing strategy for its IPO. This means it will submit its IPO documents to the Securities and Exchange Board of India (SEBI) without making its financials and other business details public right away. Other new-age start-ups like Swiggy, Groww, Meesho, and Zepto have also adopted this strategy recently.
Market conditions
PhonePe's IPO on hold
Razorpay's IPO plans come at a time when Walmart-backed payments company PhonePe has put its $1.3 billion IPO on hold due to geopolitical tensions from the West Asia conflict. The decision was also influenced by public market investors' $7 billion valuation, which was over 50% lower than its on-paper valuation.
Investor scrutiny
Concerns over growth sustainability and profitability affect IPO pricing
Concerns over Razorpay's growth sustainability and profitability could affect its IPO pricing. Public market investors in India have become increasingly selective, preferring companies with clear profitability timelines or those showing significant growth numbers. "With a number of new-age companies now listed, investors in the public markets are pricing startups more conservatively as the performance of a bunch of them hasn't been great," a person familiar with the matter told ET.
Financials
Razorpay's financials and preparations for IPO
Razorpay has been preparing for its IPO for some time now. The company reported a 65% year-on-year (YoY) increase in consolidated operating revenue to ₹3,783 crore in FY25 from ₹2,296 crore the previous year. However, it also posted a net loss of ₹1,209 crore during the same period due to Esop expenses and costs related to its domicile transition.
Market impact
About Razorpay and its services
Razorpay, which is registered as a payment aggregator with the Reserve Bank of India (RBI), provides online, offline, and cross-border payments services. The company primarily caters to small and mid-size merchants but has also ventured into consumer payments by acquiring a majority stake in Pop last year. Despite the slowdown in the direct-to-consumer segment affecting companies like Razorpay, it continues to be one of the most preferred payment service providers for new-age e-commerce companies.