Fintech Giant Bulks Up War Chest Following Separation from Flipkart
Indian fintech giant PhonePe has raised another $200 million as part of an ongoing funding round, bringing its total haul to $650 million in recent weeks despite the market slump. This significant investment has helped PhonePe bulks up its war chest following its recent separation from parent firm Flipkart.
Walmart Invests $200 Million in PhonePe
The majority investor in PhonePe, Walmart, has invested $200 million into the startup as part of the ongoing round. The valuation of the Bengaluru-headquartered company now stands at a staggering $12 billion pre-money. PhonePe plans to raise up to $1 billion as part of this ongoing funding round.
"We are excited about PhonePe’s future and have confidence in how it continues to expand its offerings and provide access to financial services for Indians at scale," said Judith McKenna, President and CEO of Walmart International, in a statement. "India is one of the world’s most digital, dynamic and fastest growing economies, and we are pleased to have the opportunity to continue to support PhonePe."
PhonePe’s Dominance in UPI Transactions
PhonePe dominates transactions on UPI (Unified Payments Interface), a network built by a coalition of retail banks in India. UPI is the most popular way Indians transact online, processing more than 8 billion transactions a month. Google’s GPay and PhonePe currently process over 80% of all UPI transactions.
PhonePe commands about 50% of all these transactions and is showing no signs of slowing down. The company said last week that it was on pace to process transactions worth $1 trillion annually.
Separation from Flipkart: A New Era for PhonePe
Walmart, which also owns a majority share in e-commerce giant Flipkart, recently stated that the separation of Flipkart and PhonePe was "very analogous to eBay and PayPal, where each of them operating independently can pursue their own initiatives." This separation has paved the way for PhonePe’s growth.
Concerns Over Market Share
A concern for PhonePe’s growth was the National Payments Corporation of India (NPCI), which oversees the UPI network. The NPCI had enforced a check on the market share of each participating player. However, it recently extended the deadline until 2025, allowing PhonePe to continue its fast growth.
PhonePe’s End Game: Becoming a Bank?
Industry experts reckon that PhonePe’s end game might be to become a bank, which justifies its lofty valuation. PhonePe clocked revenue of $234.3 million in the first nine months of 2022. It expects to post revenue of $325 million in calendar year 2022 and $504 million in 2023, according to a valuation report prepared by auditing firm KPMG and filed by PhonePe in January.
The startup doesn’t expect to turn EBITDA-positive (a key profitability metric) until calendar year 2025, KPMG wrote in the report. However, this doesn’t seem to have deterred investors from pouring money into the company.
PhonePe’s Future
With its valuation at an all-time high and a significant amount of funding at its disposal, PhonePe is poised for further growth. As the fintech landscape continues to evolve, it will be interesting to see how PhonePe navigates the challenges ahead and fulfills its ambition of becoming a bank.
What’s Next?
The next few months are crucial for PhonePe as it looks to expand its offerings and increase its market share. With its strong backing from Walmart and a solid foundation in UPI transactions, PhonePe is well-positioned to take on the challenges ahead.