Razorpay Aims For Omnichannel Dominance In Payments With Latest Buy

Razorpay has taken a first step to mark its presence in the offline payments space as it acquired point-of-sale terminal firm Ezetap.

“This partnership with Ezetap will empower Razorpay to become India's largest omnichannel payments solution for all businesses,” a company statement said.

While it didn't disclose the deal amount, a person familiar with the matter told BQ Prime that Razorpay paid about $150 million (about Rs 1,200 crore) to buy Ezetap.

The deal took about six months to close, the person said on the condition of anonymity. The acquisition also includes an additional $50 million (about Rs 400 crore) performance-linked payout for Ezetap, this person said.

Last valued at $7.5 billion (about Rs 60,000 crore), Razorpay has garnered significant traction in online payments and is hoping to expand its footprint with Ezetap's more than 5 lakh physical touchpoints.

Founded in 2011, Ezetap processes over $10 billion in annual gross transactions and claims to hold a 7% market share in the point-of-sale device market. The firm has raised a total of $51 million (or Rs 401 crore) over six funding rounds and counts Prime Venture Partners, American Express, and Chamath Palihaptiya's Social Capital among its backers.

As part of the deal, Ezetap's 300 employees will be part of an independent business unit under Razorpay's umbrella.

While Razorpay initially examined a few similar companies for an acquisition, Ezetap's operational efficiency clinched the deal for it, Harshil Mathur, co-founder and chief executive officer at Razorpay, told BQ Prime. Both Razorpay's online payments business and Ezetap are at an “almost breakeven” point, hence acquiring Ezetap wouldn't impose a significant cash burn load on Razorpay, Mathur said.

Broadening The Funnel

About 15% of Razorpay's existing client base has an offline presence as well, Mathur said. In the past, such clients have also queried Razorpay about the possibility of the firm offering a PoS solution and these queries were part of the reason why the firm started thinking about offering an offline payment solution.

Even though offline and online payments operate on markedly different business models—with revenue linked to transaction count online and subscription fee for the device offline—the per merchant revenue for both ends up being similar.

“Offline and online are different business models but unit economics, on per merchant basis, is pretty much the same. Offline is more of a SaaS [software-as-a-service] play,” Mathur said.

By integrating offline payments into its product suite, Razorpay is hoping to achieve two main things—

• Offer an end-to-end solution to its clients.

• Enhance its ability to cross-sell its other offerings, including payroll management, neobanking services, and working capital loans.

“We share Razorpay's vision of simplifying payments and banking for Indian businesses, being available wherever their customers are and being a one-stop payment and banking platform,” Byas Nambisan, chief executive officer of Ezetap, said in a statement.

Consolidation Bells

The Ezetap deal marks Razorpay's third acquisition since the year began and coincides with another fintech major, Pine Labs, making a push into online payments, after having built a strong presence offline.

In March Razorpay had acquired IZealiant, while Curlec in February.

While broader bear markets are always a good time for consolidation in sectors, certain segments within fintech are especially ripe for it, Vishwanath V, general partner at 8i ventures, an early-stage investment firm, said.

Razorpay's Mathur concurs. “There are certain segments within fintech, especially on the business-serving end, that are yet to see significant innovation to begin with. There is room for consolidation in the more concentrated segments of the market.”

Both Ezetap and Razorpay, Mathur said, will work toward expanding their own businesses, while also examining how to cross-sell their services to the other's customers.

Razorpay offers services like payroll management for relatively small companies, working capital loans, and business-facing neobanking services, through RazorpayX. While the cross-sell opportunity seems evident, figuring out how exactly it will play out will still take some time, Mathur said.