Days after Flipkart borrowed a credit of 450 Crores from HDFC Bank, it is now Alibaba-backed PayTm which has borrowed an amount of 300 crores from ICICI Bank. The reason given for it is the same- working capital to run the business operations although according to analysts, it again reflects the scenario of subdued VC funding in India.
The information was reported by ET and was found from the latest documents filed by PayTm with the Registrar of Companies (RoC).
According to the documents, PayTm deposited the cash assets as security for the latest loan, They also revealed that the previous loan of 15 crores, which was taken last year for working capital, has been repaid by the company.
On being asked about the latest move, PayTm founder Vijay Shekhar Sharma said,
This is a treasury management move for working capital. While adequate funds are there, it is advised by our finance teams to get these credit lines for working capital on the back of security such as FDs (fixed deposits), mutual funds, etc, in order to conserve cash.
It is noteworthy that the payment business of the company has already become profitable as revealed by the company last month.
However, the e-commerce division of the company continues to burn cash with the company reportedly spending a whopping $20 million a month to support the various discounts on its e-commerce platform.
While this is a similar situation with many other top e-commerce companies in India, be it Flipkart, Snapdeal or Amazon, PayTm also needs additional funds for its upcoming PayTm bank.
On the other hand, Flipkart is reportedly already looking to raise $1 billion for its next round of funding although on a valuation lower than the present.
That is, of course, not surprising going by the marking down of its share by Morgan Stanley as well as overall investor skepticism about its inflated valuations and profitability issue