Walmart invests $200 million in Indian mobile payment giant PhonePe

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

Walmart, which owns the majority of PhonePe, has invested 200 million dollars in the startup. The ongoing round values ​​Bengaluru-headquartered PhonePe at an upfront 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 have confidence in how it continues to expand its offerings and provide access to financial services for Indians at scale. India is one of the world’s most digital, dynamic and fastest growing economies and we are excited to have the opportunity to continue to support PhonePe,” Judith McKenna, president and CEO of Walmart International, said 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 reach $1 billion in revenue by March this year, is currently valued at less than $5 billion.

PhonePe, to be sure, is the 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 more than 8 billion transactions a month.

Seven-year-old PhonePe commands about 50% of all these transactions. PhonePe said last week it was processing $1 trillion worth of transactions annually. Walmart, which also owns the majority of 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 about PhonePe’s growth was that the Indian regulator enforced a check on the market capitalization of each participating player, but 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 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, stock broking, ONDC-based shopping and account aggregator businesses.

Industry experts reckon PhonePe’s endgame could be to become a bank, which they say justifies its 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 filed by PhonePe in January.

The startup does not expect to turn EBIDTA positive, a key profitability metric, until calendar year 2025, KMPG wrote in its valuation report. PhonePe’s finances and calculations from the valuation report have not previously been reported.

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