PhonePe The Walmart-backed business is now the most valuable fintech in India after raising $350 million in a new round of funding from General Atlantic at a valuation of over $12 billion. PhonePe is a payments and financial services unicorn. According to a statement released on January 19, the company plans to raise $1 billion in tranches during this round.
PhonePe is the company’s spin-off from fundraising e-commerce startup Flipkart, announced in December. The Flipkart spin-off also completes PhonePe’s transition into a fully India-resident company, starting in 2022.
PhonePe has now become a decacorn or startup company valued at over $10 billion, joining the ranks of Flipkart, which Walmart acquired; Paytm, which went public last year; Byju’s and Swiggy. PhonePe’s valuation has also exceeded Razorpay, the digital payments and neo banking unicorn, valued at around $7.5bn.
The business said in a statement on January 19 that PhonePe will use the funds to make infrastructure investments, including data centre development.
The business also plans to invest in new businesses, including insurance, wealth management and lending. The company said PhonePe would also focus on UPI Lite and Credit on UPI.
The new fundraiser in the middle of startup funding winter is a rare case of a late-stage round in which investors write small checks when the macro environment deteriorates. When Flipkart spun off PhonePe as a separate entity, its value was $5.5 billion. Flipkart had put in $700 million at that time.
PhonePe’s fundraising has seen its valuation tumble by over 60 per cent since its nearest rival, Paytm, went public in November 2021, prompting public shareholders to question the company’s ability to reach profitability. Paytm had a total market capitalization of over $4.3 billion as of January 19.
But Paytm’s revenue is much more than PhonePe. As of FY22, Paytm’s revenue was Rs 3,892.40 crore, while PhonePe’s revenue was Rs 1,646 crore. Furthermore, PhonePe reported a loss of Rs 2014 crore in FY22 (2021-22), which enlarged from Rs 1729 crore in FY21 (2020-21). Paytm reported a net loss of Rs 2,325 crore for FY22, widening from Rs 1,560 crore in FY21.
PhonePe’s fundraising arrives at a particularly difficult time for fintech corporations in India, as the Reserve Bank of India (RBI) has struck the sector hard, impacting businesses across the board.
Additionally, valuations of technology and financial services companies have declined significantly this year due to macroeconomic uncertainties amid a broad correction in global financial markets. In October, Prosus-owned PayU backed out of a $4.7 billion Billdesk deal in one of the country’s biggest stress indicators over fintech valuations.
PhonePe was launch in 2015 by former Flipkart executives Sameer Nigam, Burzin Engineer and Rahul Chari.
The fintech is the market leader in Unified Payments Interface (UPI) transactions. Also, fintech has over 400 million registered users. The company has 47 per cent market share in monthly UPI volumes.
In 2017, the corporation developed into financial services, permitting customers to buy gold, insurance and mutual funds and make bill and utility payments on its platform.
On September 5, PhonePe started developing its payment gateway to extend its current quick response in-app payments and (QR) code-based UPI payment service.
The company will compete with Paytm, Razorpay and Pine Labs as it may offer its payment gateway to large offline players and small and medium-sized corporations.
In the last year, PhonePe has acquired GigIndia, Wealthdesk and OpenQ and completed the long-awaited acquisition of IndusOS.