Walmart invests $200 million in Indian mobile payment giant PhonePe

Image credit: Dustin Chambers/Bloomberg/Getty Images

PhonePe has raised an additional $200 million as part of an ongoing round, a consideration that has now helped it pull in $650 million in recent weeks despite the market slump as the Indian fintech giant fills its war chest after the recent separation from parent company Flipkart.

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

“We are excited about PhonePe’s future and confident in how it will continue to expand its offerings and provide Indians with access to financial services at scale. 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,” said Judith McKenna, President and CEO of Walmart International, in a statement.

With a valuation of $12 billion, PhonePe is India’s most valuable fintech startup. It competes with Google Pay and Paytm. Paytm, which expects to hit $1 billion in revenue by March this year, is currently valued at less than $5 billion.

PhonePe dominates transactions on UPI, a network built by a coalition of retail banks in India. UPI is the most popular way Indians shop online – processing more than 8 billion transactions a month.

Seven-year-old PhonePe commands about 50% of all those transactions, and it’s not slowing down. PhonePe said last week it was processing $1 trillion worth of transactions on an annual basis. Walmart, which also owns a majority stake in e-commerce giant Flipkart, said last month 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 .”

One concern for PhonePe’s growth was that the Indian regulator enforced a check on the market capitalization of each participating player, but its recent extension of the deadline until 2025 has paved the way for the startup for another two years of rapid growth. (Google’s GPay and PhonePe currently process more than 80% of all UPI transactions.)

PhonePe is also slowly becoming a distribution engine, leveraging its large 300 million user base to cross-sell products such as insurance. The startup said it plans to use the funds to also build and scale wealth management, lending, stockbroking, ONDC-based shopping and account aggregator businesses.

Industry experts reckon PhonePe’s endgame could be to become a bank, which they say justifies the high valuation. PhonePe had revenue of $234.3 million in the first nine months of 2022.

The firm expects revenue of $325 million for calendar year 2022 and $504 million for 2023, according to a valuation report prepared by accounting firm KPMG and posted by PhonePe in January.

The startup does not expect to turn EBIDTA positive, a key measure of profitability, until calendar year 2025, KMPG wrote in its assessment report. PhonePe’s financials and metrics from the assessment report have not been previously reported.

“We would like to thank Walmart, our majority investor, for their continued support of our long-term ambitions. We are excited about the next phase of our growth as we build new offerings for Indian consumers and merchants, along with enabling financial inclusion across the nation,” Sameer Nigam, co-founder and CEO of PhonePe, said in a statement.

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