PhonePe Raises $21 Mn From Flipkart Amid Talks Of IPO

Digital payments platform PhonePe has raised INR 150 Cr (about $21 Mn) funding from majority shareholder and ecommerce giant Flipkart.

According to the ministry of corporate affairs filings accessed by Mint, PhonePe allocated 198,755 shares to Flipkart’s Singapore-based holding. With this round, Flipkart holds about 87% stake in the payments firm and continues to be a majority investor in the payments entity.

The development comes soon after PhonePe raised $700 Mn funding from Walmart at a post-money valuation of $5.5 Bn. The company had also said that it will be partially hiving off from Flipkart Group and set up an independent board of directors. Flipkart said that the partial spin-off would help PhonePe access dedicated capital to fund its long-term ambitions over the next three to four years.

Just like its parent company Flipkart, PhonePe is also working aggressively to go public by 2023 as a separate entity in the US or India, eyeing a valuation of $7 to $10 Bn. Last week, Flipkart owner Walmart’s chief executive Doug McMillon reiterated the company’s commitment to seeing Flipkart as well as PhonePe go for an IPO

This year, PhonePe launched six products in insurance and wealth management. It claims to have become the fastest-growing digital insurance distributor in India.

“As Flipkart commerce continues to grow strongly serving the needs of Indian customers, we are excited at the future prospects of the group. This move will help PhonePe maximize its potential as it moves to the next phase of its development, and it will also maximize value creation for Flipkart and our shareholders,” said Kalyan Krishnamurthy, CEO of Flipkart Group.

PhonePe was founded in 2015 by Burzin Engineer, Rahul Chari and Sameer Nigam. It was acquired by Flipkart in April 2016, only five months after the payments company was incorporated. The company now claims to have more than 250 Mn registered users with over 100 Mn monthly active users, generating nearly 1 Bn transaction in October.

The company is currently leading the UPI (unified payments interface) market, along with Google Pay. The duo cumulatively hold more than 80% of the market share. In November, Google Pay registered about 960 Mn transactions worth INR 1.61 Lakh Cr, whereas PhonePe recorded 868.4 Mn transactions worth INR 1.75 Lakh Cr. In October, Google accounted for 857.81 Mn transactions, while PhonePe ranked second with 839.88 Mn transactions.

Just like its parent company Flipkart, PhonePe too is working aggressively to go public by 2023 as a separate entity in the US or India, eyeing a valuation of $7 to $10 Bn. The company has been looking to diversify its portfolio after the government’s zero MDR (merchant discount rate) rule which leaves very little revenue potential in UPI alone.