In a move that can power its super app dream, Walmart-owned digital payments platform PhonePe is reportedly buying homegrown startup Indus OS that has created a regional language mobile operating system, along with a suite of applications for vernacular content and app discovery.
Both the companies have signed the deal which is worth USD 60 million two weeks ago, said a report by local media Entrackr, citing sources.
Indus OS acquisition is likely to help PhonePe with its Switch feature that it rolled out in late 2019 in a step toward becoming a super app. PhonePe Switch allows 3rd party apps to list on its platform and tap into its user base. The company hopes this will increase the stickiness of its app as users wouldn’t have to leave its platform for any kind of online transaction.
It currently has 300 different app partners for food delivery, grocery, shopping, doctor consultation, and ticket booking, among other things. The Indus OS acquisition fits in well with PhonePe’s super app vision as the startup has a vernacular app store where it claims to have over 400,000 local apps, catering to 100 million users in 23 regional languages.
The underlying theme in both cases is the aggregation of third-party apps to create a single content and commerce platform for users.
The handshake will also help PhonePe bring more apps to the Switch platform and expand its reach through Indus OS’s existing partnerships with smartphone manufacturers. While Indus OS will spearhead PhonePe Switch and build an app ecosystem for the latter, the digital payments giant will enable in-app purchases for Indus App Bazaar, said the Entrackr report.
According to another report by local media Economic Times, PhonePe and Indus OS are in the process of finalizing details of the acquisition, including the composition of the team.
“There are still a few things to be decided on how things will be executed after the acquisition and the team structure. But it should close in the next month or two,” it said, citing sources.
Indus OS is PhonePe’s second acquisition since its inception in 2015. It had acquired Zopper Retail in July 2018, a hyperlocal Point of Sale (PoS) platform for small and medium businesses.
PhonePe currently has a registered user base of over 287 million of which 110 million are monthly active users. As per the company, 80% of its users are from tier-2, 3, 4, and beyond cities. It crossed 1.3 billion transactions (overall) in March 2021 and became the first digital payments platform to cross a billion transactions on UPI, commanding almost 44% market share in UPI transaction volumes.
“During the pandemic, we saw a 50% rise in new users coming to PhonePe and 85% of these new users were from small towns and rural areas,” PhonePe told KrASIA, in a recent interview. The development comes at a time when PhonePe has its eyes set on “becoming profitable and plans to file for an IPO over the next few years.”
The company declined to comment for this story.
Indus OS, which began as a regional language mobile operating system maker, was founded in May 2015 by Rakesh Deshmukh, Akash Dongre, and Sudhir Bangarambandi. Later that year, the startup signed an agreement with India’s Department of Electronics and Information Technology (Deity) to co-develop a native text-to-speech engine to embed in its operating system that would allow users to operate smartphones through voice commands in their local language.
Initially, the company grew on the back of its partnership with Micromax, one of the major homegrown mobile manufacturers. Over the years, several smartphone makers, including Gionee, Karbonn, and Samsung became its customers and integrated many of its features in their handsets.
In mid-2019, the South Korean giant’s venture capital arm, Samsung Ventures led a USD 5.75 million Series B round in Indus OS. The Mumbai-based startup has raised a total of USD 20 million to date and counts Ventureast, Omidyar Network, JSW Ventures, and Affle as its backers. Currently, Samsung and Affle hold a 20% and 8% stake in Indus OS, respectively. Following the deal, Indus OS’s investors would take an exit, while the team along with founders will join PhonePe, Entrackr report said.