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Paytm Pledges All Assets to ICICI Bank for Higher Working Capital

A large scale startup like Paytm certainly needs more working capital than a small or midsize startup. The viable solution: pledge all your assets and boost your working capital. This is exactly what India’s largest digital marketing company Paytm has done.

Photo of ICICI Bank CEO Vijay Shekhar Sharma
Paytm Pledges All Assets to ICICI Bank to borrow Rs 1,400 crore.

According to Livemint, Paytm’s parent company One97 Communications Ltd has entered in to agreement with ICICI Bank to raise company’s working capital capacity. Mint claims that it has reviewed the ICICI agreement filed by Paytm with Ministry of Corporate Affairs (MCA).

As per the agreement, Gurgaon based company’s working capital will now increase significantly from earlier capacity of Rs 4,00 crore. In return, the company has pledged all its current assets and mutual fund investments. Its asset is approximately worth Rs 7,085.1 crore as on 31 March 2018.

Paytm’s sweeping decision to pledge all its current assets clearly demonstrates that market’s liquidity condition is not really conducive. In the wake of the banking sector’s rising NPA, banks seem to be hesitant to lend capital to startups, including prominent startups like Paytm.

Increased working capital will also help Gurgaon based company to scale up its business much faster amid tight liquidity condition. Besides, it may help the company to narrow down its losses, especially on the e-commerce front. Its e-commerce arm Paytm Mall is evidently making the company bleed as it aims to catch up with Flipkart & Amazon. According to filing with MCA, Paytm Mall’s losses accumulated to ₹1,787.55 crore on a total revenue of ₹774.86 crore during FY18.

On scaling front, India’s largest digital payment company is going on a pretty aggressive mode. The company has already made this year’s first acquisition by acquiring hotel aggregator startup NightStay. Sources claim that many more acquisitions are on the card in the current year as the company looks to consolidate its position in new verticals.

Paytm will also look to consolidate its position in the core business of digital payment. With the rise of UPI payment, India’s digital payment scenario has gone through sweeping changes. Therefore, Vijay Shekhar Sharma & co can ill afford to be complement in such challenging scenario. Not to mention Sharma will be eager enough to put life into its international operation, after launching payment operation in Japan last year.

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