PhonePe Valuation Soars To $7 Bn After Split From Flipkart

Bengaluru-based digital payments company PhonePe has now been valued at $7 Bn by Morgan Stanley in its latest report. The company PhonePe could be worth as much as $20 Bn in the bull case.

Due to the growing potential of PhonePe beyond just payments, the forecast by Stanley will also have a massive impact on Flipkart’s owner, Walmart. The company’s share price has hit $118, an all-time high, and it could go up to $125 in the base case and $165 in the bull case.

At the time of publishing, Walmart was trading at $115 on Friday. Flipkart had bought PhonePe from its founders aka ex-flipsters Sameer Nigam, Rahul Chari and Burzin Engineer in 2015. It offers peer-to-peer transfer, recharges, bill payments, gold purchases, among others.

Apart from providing a point-of-sale device for offline vendors, the company is diversifying its offline offerings based on the requirements of the merchant. PhonePe claims to have over 150 Mn users and provides them with its “super-app”, which integrates 25 large digital apps including Goibibo and OYO.

In March, Flipkart had passed the resolution for PhonePe to evolve as an independent entity and since then, reports have been rife that it is raising fresh funding of up to $1 Bn. This fundraise is reportedly gaining ground as investors such as DST Global, Ribbit Capital, Falcon Edge, Green Oaks and Hillhouse Capital express their interest.

PhonePe has been looking to be valued at $8 Bn-$12 Bn and is ready to dilute 10% of the company’s equity. After dubious investors on this valuation, the Morgan Stanley report is expected to help the company achieve its valuation goal and raise this new funding ground.

The company had recently said that it drove over 380 Mn UPI transactions in August, with more than 90 Mn offline transactions. PhonePe earlier said that growth has come on the back of the exponential expansion of PhonePe’s merchant network, both online and offline. It also invested aggressively on its marketing activities this year.

In such positive growth prospects, Morgan Stanley has also predicted three different scenarios for PhonePe for 2029. The data outlines that PhonePe could generate revenues of $70 Mn from payments vertical in bull case, $690 Mn from the distribution of financial services, and $2.5 Bn from consumer lending by 2029.

PhonePe could follow a path like China’s Ant Financial and could well be the Indian super app, Simeon Gutman, ED (equity research) at Morgan Stanley noted. As PhonePe aims for bigger wins, the war in the digital payments space is also about to get bigger and better.

In terms of the WhatsApp payments, which was expected to be launched in May 2018, the plan got stuck with the requirements of data localisation. However, with a user base of 400 Mn in India, the company is looking to launch payments services in next 3-6 months.

According to NITI Aayog’s “Digital Payments (2018 edition)”, India’s digital payments industry is estimated to grow to $1 Tn by 2023. It also suggested that the value of digital payments will likely jump from the current 10% to over 25% by 2023.