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Razorpay is not going for an initial public offering (IPO) anytime soon—at least not until the fintech giant is profitable “at a group level,” said Shashank Kumar, Co-founder and CTO of Razorpay. 

During a fireside chat with YourStory Founder and CEO Shradha Sharma on the final day of TechSparks 2024, Kumar revealed that Razorpay is still in the process of reverse flipping—where Indian startups registered in offshore jurisdictions decide to move their headquarters to India.

Founded in 2014 by Harshil Mathur and Kumar, Razorpay was initially registered in the US. “We went through Y Combinator, and that’s how the process was… And, back in 2014-15, there were a lot of questions around whether the Indian market could absorb the startups that will come in the IPO scene, and whether or not investors would understand startups and technology,” Kumar explained. 

Nonetheless, the Razorpay CTO is happy about how things have changed, with many Indian startups redomiciling and listing in the Indian market.

“If you go to the Western countries, you will see how bleak the environment is when it comes to companies going for an IPO. We are in a good state,” he added. 

The co-founder emphasised that Razorpay’s reverse flipping process is expected to be completed in the next six to nine months, and the founders wish to have “solid India financials before we go for an IPO.”  

While Razorpay’s payments business is already profitable, other segments like international expansion and marketing products—where the firm is heavily investing—are yet to turn profitable. “We want the company to go profitable at least at the group level… We see that happening in at least two years… Once that happens, then I think we will go for an IPO,” Kumar emphasised.

On lending as a business 

During his chat, Kumar advised entrepreneurs to never build a business around lending from day one. He suggested lending is probably a good third or fourth line of business. 

“At a fundamental level, lending is not a technology business… If you are in the fintech space and have a captive and engaged audience already using your core product, then lending on top of that is easy,” he said.

Explaining further he said, it is easier to fail in lending when one already has a successful business, adding that startups should focus on the multiple areas where technological disruption is possible. 

“This is why in the last few years, there have been only a few lending startups that have successfully scaled big,” he said. 

Cross-border payment 

Addressing a question from the audience on cross-border payments, Kumar said, “The cross-border payment space is very painful… The regulations have been very unclear… Everyone tries to do their own thing, and the environment around it is not sorted.” This is probably why many entrepreneurs, despite paying 10-20% charges, often end up using PayPal. 

Having said that, “Probably in the next 6-12 months, either Razorpay or someone else will get the cross-border payments problems solved,” Kumar said with conviction. 

He noted that both the regulator and the government recognise the importance of cross-border payments for India’s import and export ecosystem. He pointed out that they are working on refining the rules and regulations in the space to create smoother pathways for transactions.

“And when that happens… product companies like ours will be able to build better solutions,” Kumar said, adding that Razorpay has been working on a cross-border payments solution for the last three to four years but has not been able to build something that the company is “proud of”. 

“So, there will be a lot of failures. But in the next six to 12 months, it will be a solved problem,” he added.