One of the largest unified payments interface (UPI)-backed digital payments platform Phonepe is reportedly finding it hard to raise funds from marquee investment firms, like Visa, SoftBank, Naspers, Qatar Investment Authority, Canadian Pension Plan, and others. Phonepe has denied the reports.
Phonepe’s spokesperson told Inc42, “As a company we don’t comment on funding speculation. Our investors remain very bullish on PhonePe’s business prospects and continue to meet our capital needs. As we said before, any external capital raise would only be for strategic purposes, and we are not actively looking to raise funds externally.”
However, reports from last year also note that Phonepe was in talks with KKR and Co, General Atlantic LLC, Tiger Global and Tencent to raise funding at a $10 Bn valuation. Currently, the company is valued at $7 Bn.
According to a report in Business Standard, Walmart-owned Phonepe is looking to raise $1.2 Bn at a $10 Bn valuations, however, the investors are not really keen on valuing the digital payments platforms at that amount.
Besides the difference in the company’s valuation, Phonepe’s discussions are not making much progress due to upcoming ecommerce and data policies and the overall investment environment. In addition, Phonepe’s limitation to digital payments is not something that is going too well with the investors.
The report also states that after the investors did not meet Phonepe’s valuation demand, the company itself has slowed down the investment process.
However, Phonepe raised $80.26 Mn funding from its Singapore-based parent entity Phonepe Pvt Ltd in exchange for 1.3 Mn shares in September 2019. The parent company had infused $101.5 Mn for 2.02 Mn Phonepe shares in July 2019.
Founded in 2015 by Sameer Nigam, Rahul Chari and Burzin Engineer, Bengaluru-based Phonepe offers peer-to-peer transfer, recharges, bill payments and gold purchases, among other services.
Phonepe was acquired by Flipkart in 2016 and since then it has become a super app that integrates 25 large digital apps including Goibibo and OYO. Recently, the company managed to cross 5 Bn transactions, out of which, nearly 56% of transactions were from Tier 2 and Tier 3 cities.
Between November 2018 to November 2019, Phonepe recorded one billion transactions, noting a 5x increase. The company claims to have registered over 150 Mn users on its platform, out of which 55 Mn are monthly active users (MAU).
Despite the performance, Phonepe reported a loss of INR 1904.72 Cr in the financial year 2019, ending March. During the same financial year, Phonepe also recorded a 401% hike in its revenue with INR 245.8 Cr, compared to INR 49 Cr in the previous year.
Moreover, the company’s expenses also grew by 156% in FY19, amounting to INR 2153.2 Cr. This rising expense can be attributed to the money spent on advertising and promotions, which made up 85% of Phonepe’s total expense in FY19.