Razorpay bets on offline, overseas business ahead of IPO

Online payments aggregator Razorpay Software Pvt Ltd is focusing on its offline and international business ahead of its initial public offering, top executives told Mint.

"In India, offline is a much bigger market, and that is our big push," said co-founder and chief executive officer Harshil Mathur. In August 2022, Razorpay entered the offline segment through the acquisition of Ezetap.

The company expects offline payments, which make up about 15% of Razorpay’s revenue, grow to about 30% in the next three years. 

Sound boxes, QR codes, tap-and-pay, POS machines are among services provided by payments companies in the offline mode. Razorpay launched several such products recently. These include DigiPOS, a new machine that will help customers skim through offers offline like it is possible on online platforms. 

Razorpay is launching its own sound boxes. So far, it had co-branded POS machines and sound boxes in association with banks, with the latter's branding. 

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"Offline payments have not seen major disruption compared to online payments and lag behind by almost a decade," said Rahul Kothari, chief operating officer at Razorpay. The company plans to also target bigger merchants who use POS machines over just sound boxes to grow its brand presence.

Razorpay is expanding its presence across Southeast Asian countries, such as Singapore. “We are in the process of applying for a licence. But we would be working with a partner to start providing our services (in the region),” he said.

Razorpay, which entered Malaysia in 2022, has seen its revenue in the region grow at 30% month on month, CEO Mathur said, adding that it “translates to an annual growth of 400%”.

According to Mathur, real-time payments are starting to emerge in markets like Malaysia, which Razorpay and other players are well positioned to capitalise on. “(Such countries) ... are essentially trying to replicate what UPI did, we can replicate our success in those markets as well. We already have the products that work well for real-time payments, and we know which industries benefit from that,” he added.

Kothari said the next geography to target for after Southeast Asia would be the Middle East. The company is in the process of building itself in the region.

“From the overall strategy perspective, we would be kind of looking at licensing in multiple geographies,” Kothari said, adding that it will help the company build out seamless processes to conduct cross-border transactions for import and export merchants, especially in India.

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Razorpay has applied for a cross-border payments (PA-CB) licence with the Reserve Bank of India. So far, companies like Cashfree Payments, BillDesk, and Amazon Pay, among others, have received the licence from RBI.

Razorpay is planning to go public over the next two to three years.

Razorpay's journey so far

Founded in 2014 by Mathur and Shashank Kumar, the Bengaluru-based company last raised $375 million in 2021, led by Lone Pine Capital, Alkeon Capital, and TCV, with participation from existing investors including Tiger Global, Peak XV Partners, among others. So far, Razorpay has raised over $740 million in funding. 

The company has also reserved around $150-200 million, which it will need to pay in taxes in the US, as it returns its corporate headquarters to India ahead of a potential listing here.

The company faced a setback when it was barred from onboarding new merchants on its platform by the RBI until December last year when it secured the payment aggregator licence from the regulator.

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After a pause of about seven months after obtaining the licence, the company completed onboarding the backlog of merchants that had applied for its services. Kothari said the company onboarded as many as 1.5 lakh new merchants out of about 5 lakh that showed interest during the ban.

The company’s revenue soared 54% to ₹2,279 crore in FY23 from ₹1,481 crore in FY22, while it reported a flat net profit of ₹7.3 crore. While Razorpay is yet to file its FY24 numbers, Kothari said the onboarding of new merchants is expected to show a positive impact on the revenue the fiscal.