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Thursday, March 30, 2023

Walmart invests $200 million in Indian mobile payment giant PhonePe

PhonePe has raised an additional $200 million in an ongoing round, which has helped it raise $650 million in recent weeks despite a market slump as the Indian fintech giant reinvested after its recent spinoff from parent company Flipkart Cash is under construction.

Walmart, which owns most of PhonePe, has invested $200 million in the startup. The current round values ​​PhonePe, headquartered in Bengaluru, at a pre-money valuation of $12 billion. PhonePe previously said it plans to raise up to $1 billion in its current funding round.

“We are excited about the future of PhonePe and confident that the company will continue to expand its offerings and bring access to financial services to India at scale. India is one of the world’s most digital, dynamic, and fastest growing economies, and we welcome the opportunity to continue to support PhonePe,” said Judith McKenna, President and CEO of Walmart International, in a statement.

With a valuation of US$12 billion, PhonePe is the most valuable fintech startup in India. It competes with Google Pay and Paytm. Paytm, expecting sales of $1 billion in March this year is currently valued at less than $5 billion.

PhonePe is undoubtedly the clear leader in the mobile UPI payments market, the network built by a coalition of retail banks in India. UPI has become the most popular online transaction method for Indians, processing more than 8 billion monthly transactions.

Seven-year-old PhonePe handles about 50% of all these transactions. PhonePe announced last week that it was on track to process $1 trillion worth of transactions every year. Walmart, which also owns a majority stake in e-commerce giant Flipkart, said last month that the separation of Flipkart and PhonePe was “a lot like eBay and PayPal, where everyone can operate independently, pursuing their initiative.”

The problem with PhonePe’s growth is that Indian regulators are imposing market cap checks on every participating player. Still, the recent extension of the deadline to 2025 has paved the way for the startup for another two years of rapid growth. (Google’s GPay and PhonePe currently process over 80% of all UPI transactions.)
PhonePe is also slowly emerging as a sales machine, leveraging its massive 300 million user base to sell products such as insurance. The startup also plans to use the funds to build and scale its wealth management, lending, stockbroking, ONDC-based purchasing, and account aggregator businesses.

Industry experts believe that PhonePe’s ultimate goal is to become a bank, which justifies its high rating. PhoneP reported revenue of $234.3 million in the first nine months of 2022.

The company expects revenue of $325 million in the calendar year 2022 and $504 million in 2023, according to an appraisal report prepared by auditing firm KPMG and filed by PhonePe in January.

Startups do not expect to turn EBIDTA, a key measure of profitability, positive in the 2025 calendar year, wrote KMPG in its assessment report. PhonePe’s finances and metrics from the appraisal report are not reported beforehand.

“We would like to thank Walmart, our majority investor, for supporting our long-term endeavors. We look forward to the next phase of our growth as we build new offerings for Indian consumers and merchants and enable financial inclusion across the country,” said Sameer Nigam, co-founder, and CEO of PhonePe, in a statement.

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