Walmart-backed digital payments platform PhonePe, which recently became India's most-valued fintech unicorn, may take another two years to turn operationally profitable, unlike its closest competitor Paytm, which expects to achieve EBITDA profitability by as early as this year.
PhonePe will have an EBITDA (earnings before interest, tax, depreciation and amortisation) profit of Rs 1,797 crore in the calendar year 2025, with an EBITDA margin of 19.7 percent, the company's management told audit firm KPMG. The company's management expects revenue of Rs 9,139 crore in 2025.
KPMG collated a valuation report for PhonePe in November, ahead of the fintech's fundraise in January. It was filed with the Ministry of Corporate Affairs (MCA) last week.
Paytm, meanwhile, expects to achieve adjusted EBITDA break-even by September this year.
According to PhonePe's filing with the MCA, the company's revenue in the first nine months of 2022, jumped to Rs 1,912 crore. In FY22 (2021-22 or 12 months to March 2022), PhonePe reported a revenue of Rs 1,646 crore. For the 12 months ending December 2022, PhonePe expects a revenue of Rs 2,655 crore and an EBITDA loss of Rs 471.5 crore.
In the first nine months of 2022, PhonePe spent Rs 513 crore on marketing, referral and cashback, against Rs 866 crore in the twelve months ending March 2022. As a percent of revenue, PhonePe's marketing expenses were down to 26.8 in Jan-Sept 2022 compared to 52.6 percent in April-March 2022, the filings showed.
According to the report, PhonePe's management told KPMG that the Walmart-backed firm will have an EBITDA margin of 50 percent every year from 2029 onwards and will grow at a CAGR (compounded annual growth rate) of 22.9 percent between 2022 and 2047. Explaining the rationale behind PhonePe's predictions, KPMG, citing a BCG PhonePe Pulse report, said that the digital payment industry in India is seen growing at a CAGR of 35 percent between 2022 and 2027.
According to the valuation report, PhonePe's projected growth can be attributable to an increase in revenue from the payments business, the sale of services – Soundbox, the expected expansion of PhonePe’s business in the financial services landscape and new acquisitions business growth. The report said PhonePe installed 1.3 million Soundbox devices since its launch.
PhonePe's management also told KPMG that the company's growth in financial services is expected primarily from the insurance business.
The Walmart-backed fintech's management also sees a reduction in cashback, marketing, and referral expenses due to the higher market penetration and lower cost of new customer acquisition and expects better absorption of fixed overheads due to scale benefits.
The report, dated November 14, pegged PhonePe's valuation at Rs 95,540 crore ($12 billion) as of September 30, almost three times that of Paytm, which had a market capitalisation of Rs 34,560 crore as of January 30. In October last year, we reported how PhonePe was looking to raise a large funding round from General Atlantic at a valuation of $12 billion. Earlier this month, the company officially announced it.