India’s PhonePe Surpasses $12 Billion Valuation in New Funding

PhonePe’s valuation has more than doubled to more than $12 billion in a new funding round as the Indian fintech giant prepares to live without parent company Flipkart. The Bengaluru-based startup said it raised $350 million and plans to raise up to another $650 million in the round in a remarkable feat at a time when fundraising activity has slowed globally as investors become cautious.

General Atlantic led the first tranche of the investment. The company did not assign a name to the funding round, but said it was valued at $12 billion before money. TechCrunch reported last month that PhonePe was finalizing a major funding round at $12 billion pre-money valuation.

$12 billion is a staggering valuation for PhonePe, which was valued at $5.5 billion at the end of 2020. PhonePe currently makes less than $450 million in annual revenue. Its publicly traded rival Paytm, which expects to hit $1 billion in revenue in the fiscal year ending March 2023, currently has a market capitalization of $4.2 billion.

Walmart, a majority investor in PhonePe, is expected to participate in the current funding round, according to a source familiar with the matter.

PhonePe, of course, is a clear market leader in mobile payments on UPI, a network built by a coalition of retail banks in India. UPI has become the most popular way for Indians to transact online and processes over 7 billion transactions per month. Seven-year-old PhonePe controls about 40% of all these transactions. The startup claims to have over 400 million registered users and over 35 million offline merchants rely on the platform.

A concern for PhonePe’s growth was that the Indian regulator was applying market capitalization controls to each player, but the deadline for the new guidelines was extended last month and will now only come into effect in 2025, giving PhonePe another two years of rapid growth.

“I would like to thank General Atlantic and all of our existing and new investors for their confidence in us. PhonePe is proud to help lead India’s nationwide digitization efforts and believes that this powerful public-private collaboration has made India’s digital ecosystem a global example. We are an Indian company, built by Indians, and our latest fundraising will help us further accelerate the Government of India’s vision of digital financial inclusion for all,” said Sameer Nigam, Founder and Managing Director of PhonePe, in a statement.

“We look forward to delivering the next phase of our growth by investing in new lines of business such as insurance, wealth management and lending, while facilitating the next wave of UPI payments growth in India.”

PhonePe was founded in 2015 and within a year was acquired by e-commerce giant Flipkart. The two went their separate ways last month and now Flipkart no longer holds a stake in the payment company. The separation will impact Flipkart’s valuation. In July last year, Flipkart Group raised $3.6 billion at a valuation of $37.6 billion. Flipkart does not plan to re-enter the mobile payments market, TechCrunch reported earlier.

PhonePe said it would deploy the new funds to make significant infrastructure investments, including developing data centers and building more financial services. The company also plans to invest in new businesses, including insurance, wealth management and lending.

“Sameer, Rahul and the leadership team at PhonePe have pursued a clear mission to drive the digitalization of payments and dramatically expand access to financial tools for the people of India. They remain focused on adopting inclusive products built on the Open API-based ‘Indian Stack’,” said Shantanu Rastogi, Managing Director and Head of India at General Atlantic, in a statement.

“This vision aligns with General Atlantic’s long-standing commitment to supporting high-growth businesses focused on inclusion and empowerment. We are delighted to partner with the PhonePe team to help enable the next generation of digital innovation in India.

(More soon)