Walmart Invests $200 Million in Indian Mobile Payments Giant PhonePe

Walmart Invests $200 Million in Indian Mobile Payments Giant PhonePe – PhonePe, the Indian fintech giant, has successfully raised an additional $200 million in its ongoing funding round, bringing the total amount raised to $650 million despite the recent market downturn. The parent company, Flipkart, has recently separated from PhonePe, prompting the fintech firm to boost its financial reserves.

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Walmart, which owns the majority of PhonePe, has contributed $200 million to the latest round, valuing the Bengaluru-based firm at $12 billion before the investment. PhonePe has stated that it intends to raise up to $1 billion in this funding round. “We are excited about PhonePe’s future and have confidence in how it continues to expand its offerings and provide access to financial services for Indians at scale.”

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“India is one of the world’s most digital, dynamic and fastest growing economies, and we are pleased to have the opportunity to continue to support PhonePe,” said Judith McKenna, President and CEO for Walmart International, in a statement. With a valuation of $12 billion, PhonePe has become the most valuable fintech startup in India, putting it in competition with Google Pay and Paytm.

Paytm, which anticipates reaching $1 billion in revenue by March 2023, is currently valued at less than $5 billion. PhonePe is the leader in transactions on UPI, a network established by a group of retail banks in India, which is the preferred method of online transactions for Indians. UPI handles more than 8 billion transactions per month.

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PhonePe, which is seven years old, controls roughly 50% of all transactions on UPI and shows no signs of slowing down. In fact, PhonePe announced last week that it is on track to process transactions worth $1 trillion annually. Walmart, which also owns a majority of e-commerce giant Flipkart, said last month that the separation of Flipkart and PhonePe was “very analogous to eBay and PayPal, where each of them operating independently can pursue their own initiatives.”

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PhonePe’s growth was at risk due to the Indian regulator’s imposition of a market cap on each participant. However, the regulator has extended the deadline until 2025, which has opened the door for the startup to experience two more years of rapid growth. Currently, Google’s GPay and PhonePe handle over 80% of all UPI transactions.

In addition, PhonePe is gradually transforming into a distribution engine by utilizing its massive user base of 300 million to promote products, such as insurance, through cross-selling. The company has expressed its intention to use the funds to develop and expand businesses related to wealth management, lending, stockbroking, ONDC-based shopping, and account aggregators.

According to industry experts, PhonePe may be aiming to transform into a bank, which they believe validates its high valuation. In the first nine months of 2022, PhonePe earned $234.3 million in revenue. The firm projects a revenue of $325 million for the calendar year 2022 and $504 million for 2023, according to a valuation report prepared by the auditing firm KPMG and filed by PhonePe in January.

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However, the startup doesn’t expect to turn EBIDTA positive, a key profitability metric, until calendar year 2025, KMPG wrote in its valuation report. PhonePe’s financials and metrics from the valuation report have not been previously reported.

“We would like to thank Walmart, our majority investor, for their continued support of our long-term aspirations. We are excited about the next phase of our growth as we build new offerings for Indian consumers and merchants, along with enabling financial inclusion across the nation,” said Sameer Nigam, co-founder and chief executive of PhonePe, in a statement.

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