Digital payment company PhonePe—owned by online marketplace Flipkart—is creating a war chest big enough to ensure its competitors such as Google Pay, Amazon Pay, and Paytm are kept at bay in India’s fast-growing digital payment industry expected to reach USD 10 trillion in size by 2026.
Within five months of raising INR 698 crore (USD 105 million) from its parent entity, PhonePe has again raised INR 585.66 crore (USD 88 million) from Flipkart, according to its regulatory filing with the Ministry of Corporate Affairs.
In September 2019, PhonePe was valued at USD 7 billion by Morgan Stanley, and reportedly it was looking at raising funds at a valuation of USD 10 billion.
In the financial year 2019 PhonePe’s losses have more than doubled to INR 1,904 crore (USD 286 million) compared to INR 791 crore (USD 119 million) in FY 18. However, the number of transactions in terms of value and volume including the number of users remains to be on the upside. In fact, it has left behind the erstwhile leader Paytm for UPI (Unified Payments Interface) transactions that have become the norm in Indian digital payment space. UPI is India’s indigenous payment tool that enables instant payment transfer from one person to another including businesses.
While PhonePe and Google Pay had a 35% share, each of the total UPI transactions in July this year, Paytm slid down in the chart with a mere 16% market share.
Although Paytm’s market share is going down in UPI transactions, it’s no way near to backing away. It recently raised USD 1 billion led by the US-based asset management firm T Rowe Price, with participation from other investors including Alibaba, SoftBank, and Discovery Capital.
Recently, there have been talks in the industry about Walmart toying with the idea of spinning off PhonePe from Flipkart so that it could raise money on its own from the market, instead of piggybacking from the company’s internal fund.
Flipkart had acquired PhonePe in 2016 for about USD 15 million from Sameer Nigam and Rahul Chari—its former executives who had left Flipkart to launch PhonePe in late 2015.