Payments and financial services unicorn PhonePe has raised $350 million in a new funding round from General Atlantic at a valuation of over $12 billion, making the Walmart-backed startup, the most-valued fintech in India. The company would be raising as much as $1 billion in the current round in tranches, it said in a statement on January 19.
Moneycontrol first reported in October about PhonePe eyeing a fundraise from General Atlantic at a valuation of $12 billion.
PhonePe’s fundraise follows the company’s spin-off from e-commerce startup Flipkart, which was announced in December. The Flipkart spin-off also completes PhonePe's transition to a fully Indian-domiciled company, which began in 2022.
PhonePe has now become a decacorn, or a startup valued at more than $10 billion, joining the ranks of Flipkart, which was acquired by Walmart, Paytm, which went public last year, Byju's, and Swiggy. PhonePe's valuation has also surpassed that of Razorpay, a digital payments and neobanking unicorn that was last valued at around $7.5 billion.
PhonePe will be using the funds for making investments into infrastructure, including the development of data centers, the company said in a statement on January 19.
The company also plans to invest in new businesses, including insurance, wealth management, and lending. PhonePe will also focus on UPI lite and credit on UPI, the company said.
The new fundraise is a rare instance of a late-stage round in the midst of a startup funding winter in which investors are writing smaller cheques as the macro environment deteriorates. When Flipkart spun off PhonePe into a separate entity, it was valued at $5.5 billion. Flipkart had put in $700 million at the time.
PhonePe's fundraise comes at a time when its closest competitor, Paytm, has seen its valuation drop by over 60 percent since it went public in November 2021, prompting public shareholders to question the company's ability to attain company-level profitability. Paytm's total market capitalisation was just over $4.3 billion as of January 19.
But, Paytm’s revenue is much higher than that of PhonePe. As of FY22, Paytm had a revenue of Rs 3,892.40 crore, while PhonePe had a revenue of Rs 1,646 crore. Moreover, PhonePe reported a loss of Rs 2,014 crore in FY22 (2021-22), which widened from Rs 1,729 crore in FY21 (2020-21). Paytm, meanwhile, reported a net loss of Rs 2,325 crore for FY22, which widened from Rs 1,560 crore in FY21.
PhonePe's fundraising comes at a particularly challenging time for fintech companies in India, as the Reserve Bank of India (RBI) has come down heavily on the sector, affecting businesses across the board.
Moreover, valuations of financial services and technology companies have dropped significantly this year, as part of a broader correction in global financial markets caused by macroeconomic uncertainties. In October, Prosus-owned PayU backed out of its $4.7 billion BillDesk deal, in what was one of the biggest indicators of stress over fintech valuations in the country.
PhonePe was founded in 2015 by former Flipkart executives Sameer Nigam, Rahul Chari, and Burzin Engineer. The fintech has over 400 million registered users and is the market leader in Unified Payments Interface (UPI) transactions. In terms of monthly UPI volumes, the company has a 47 percent market share.
In 2017, the company expanded into financial services, allowing customers to buy gold, insurance, and mutual funds on its platform in addition to making bill and utility payments.
On September 5, Moneycontrol reported that PhonePe had started developing its own payment gateway as an extension to its current Quick Response (QR) Code-based UPI payment service and in-app payments.
The company will compete with Paytm, Pine Labs, and Razorpay, as it may look to offer its payment gateway to large offline players as well as small and medium-sized businesses.
In the last year, PhonePe has acquired GigIndia, WealthDesk, OpenQ, and completed the long-awaited acquisition of IndusOS.