Razorpay’s Bold Move: Expanding Offline & International Business Before IPO – Is This the Path to Success

Razorpay, a company that helps businesses with online payments, is now focusing on growing its offline and international business before going public. According to top executives, offline payments in India are a big market opportunity, and Razorpay is pushing hard to capture it.

Expansion into Offline Payments

Razorpay started its offline journey in August 2022 when it acquired Ezetap, a company that offers payment solutions for physical stores. Currently, offline payments make up about 15% of Razorpay’s revenue, but the company expects this to grow to around 30% in the next three years.

New Product Launches for Offline Market

To expand in the offline market, Razorpay has introduced several new products, such as DigiPOS—a machine that allows customers to browse offers in-store, similar to how they do online. The company is also launching its own sound boxes, which are used for payments in physical stores. Previously, these sound boxes and POS machines were co-branded with banks, but now Razorpay is moving towards offering them under its own brand.

Targeting Larger Merchants

Razorpay’s Chief Operating Officer, Rahul Kothari, mentioned that offline payments have not evolved as much as online payments, lagging behind by almost a decade. The company aims to target larger merchants who use POS machines, helping to strengthen Razorpay’s brand in the offline space.

International Expansion in Southeast Asia

In addition to its focus on the Indian market, Razorpay is expanding internationally, particularly in Southeast Asia. The company has already entered Malaysia, where its revenue has been growing by 30% each month, translating to an annual growth of 400%. CEO Harshil Mathur noted that markets like Malaysia are beginning to adopt real-time payments, similar to India’s UPI system, and Razorpay is well-positioned to succeed in these markets.

Future Plans for Middle East Expansion

The next region Razorpay plans to target is the Middle East. The company is working on getting the necessary licenses to operate in multiple countries, which will allow it to facilitate cross-border transactions for businesses involved in import and export, especially in India.

Securing RBI License for Cross-Border Payments

Razorpay has also applied for a cross-border payments license with the Reserve Bank of India (RBI). This license will enable the company to offer more services to its customers. Currently, companies like Cashfree Payments, BillDesk, and Amazon Pay have already received this license from the RBI.

Plans to Go Public in the Next 2-3 Years

Razorpay is planning to go public within the next two to three years. Founded in 2014 by Harshil Mathur and Shashank Kumar, the company last raised $375 million in 2021. Over the years, Razorpay has raised more than $740 million in total funding.

Preparing for IPO and Tax Payments

The company has also set aside $150-200 million to pay taxes in the US as it plans to move its corporate headquarters back to India before its potential listing.

Challenges and Financial Performance

Razorpay faced a challenge when the RBI temporarily barred it from onboarding new merchants. However, after securing the payment aggregator license in December last year, the company resumed onboarding and has added about 1.5 lakh new merchants from a backlog of 5 lakh that had shown interest during the ban.

Strong Revenue Growth in FY23

Razorpay’s revenue grew by 54% to ₹2,279 crore in FY23, up from ₹1,481 crore in FY22. The company reported a flat net profit of ₹7.3 crore. Although Razorpay has not yet shared its FY24 financial results, the company expects that onboarding new merchants will positively impact its revenue this fiscal year.