Walmart invests $200 million in Indian mobile payment giant PhonePe

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 following its recent separation from parent company Flipkart.

Walmart, which owns the majority of PhonePe, has invested 200 million dollars in the startup. The ongoing round values ​​the Bengaluru-headquartered company at $12 billion pre-money. The startup has said it plans to raise up to $1 billion as part of its ongoing 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,” 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, the latter of which is currently valued at nearly $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 – it processes more than 8 billion transactions a month. Google’s GPay and PhonePe currently process more than 80% of all UPI transactions.

Seven-year-old PhonePe commands about 50% of all those transactions, and it’s not slowing down. The company said last week it was processing $1 trillion worth of transactions annually. 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 operating independently can pursue its own initiatives.”

A concern for PhonePe’s growth was The National Payments Corporation of India, which oversees the UPI network, and enforces a check on the market share of each participating player. However, it recently extended the deadline to 2025, paving the way for two more years of rapid growth for PhonePe.

PhonePe is also slowly becoming a distribution engine, leveraging its large base of 450 million registered users to cross-sell products such as insurance. The startup said it plans to deploy funds from the funding round to build and scale wealth management, lending, stock broking, ONDC-based shopping and account aggregation.

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

The start-up does not expect to become EBITDA positive, an important profitability measurement, before calendar year 2025, KPMG wrote in the report. PhonePe’s finances and calculations from the 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,” Sameer Nigam, co-founder and CEO of PhonePe, said in the statement.