India’s PhonePe tops valuation at $12 billion in new funding • TechCrunch

PhonePe’s valuation has more than doubled to over $12 billion in a new round of funding as the Indian fintech giant prepares for life without parent company Flipkart. The Bengaluru-headquartered startup said it has raised $350 million and expects to raise another $650 million as part of the round in a remarkable feat at a time when fundraising activity has slowed globally as investors turn cautious.

General Atlantic led the first tranche of the investment. The company did not name the funding round, but said it was valued at $12 billion up front. TechCrunch reported last month that PhonePe completed a major funding round at a pre-money valuation of $12 billion.

$12 billion is a staggering valuation for PhonePe, which was valued at $5.5 billion at the end of 2020. PhonePe currently has less than $450 million in annual revenue. Public-listed rival Paytm, which expects to reach $1 billion in revenue in the fiscal year ending March 2023, currently has a market cap of $4.2 billion.

Walmart, a majority investor in PhonePe, is expected to participate in the current funding round, according to a source familiar with the matter.

PhonePe, to be sure, is a clear leader in the mobile payments market on UPI, a network built by a coalition of retail banks in India. UPI has become the most popular way Indians shop online, processing over 7 billion transactions a month. Seven-year-old PhonePe commands about 40% of all these transactions. The startup says it has over 400 million registered users and more than 35 million offline merchants rely on the platform.

One concern for PhonePe’s growth was the Indian regulator enforcing a market cap check on each player, but the deadline for the new guidelines was extended last month and now does not come into force until 2025, giving PhonePe another two years of rapid growth.

“I would like to thank General Atlantic and all our existing and new investors for the confidence they have shown in us. PhonePe is proud to help lead India’s nationwide digitization efforts and believes that this powerful public-private partnership has made the Indian digital ecosystem a global example. We are an Indian company, built by Indians, and our latest fundraising will help us further accelerate the Government of India’s vision of digital financial inclusion for all,” Sameer Nigam, founder and CEO of PhonePe, said in a statement.

“We look forward to delivering the next phase of our growth by investing in new business verticals such as insurance, wealth management and lending, while facilitating the next wave of growth for UPI payments in India.”

PhonePe was founded in 2015 and within a year was acquired by e-commerce giant Flipkart. The two parted ways last month and now Flipkart no longer owns a stake in the payments firm. The separation will have some impact on Flipkart’s valuation. In July last year, Flipkart Group raised $3.6 billion at a valuation of $37.6 billion. Flipkart does not plan to re-enter the mobile payments market, TechCrunch previously reported.

At stake is India’s payments market, which is estimated to be worth $1 trillion in the next two to three years, up from about $200 billion in 2020, according to Credit Suisse. Google and Meta are among the players investing heavily to win the market.

The payments firm has also moved its base to India, a move that triggered a major tax windfall for investors. Walmart confirmed earlier this month that it had paid the Indian government most of the nearly $1 billion in taxes owed as part of the PhonePe shift from Singapore.

PhonePe said it will use the new funds to make significant investments in infrastructure, including developing data centers and building more financial services. The company also plans to invest in new businesses, including insurance, wealth management and lending.

“Sameer, Rahul and the PhonePe management have pursued a clear mission to drive digitization of payments and significantly expand access to financial tools for the people of India. They remain focused on driving the adoption of inclusive products developed on the open API-based “India stack,” Shantanu Rastogi, managing director and head of India at General Atlantic, said in a statement.

“This vision aligns with General Atlantic’s longstanding commitment to supporting high-growth businesses with a focus on inclusion and empowerment. We are excited to partner with the PhonePe team to help enable the next generation of digital innovation in India.”