PhonePe’s diversification efforts generate initial revenue amid FY24 losses

In the hyperlocal e-commerce sector, the Pincode app reported Rs3 crore in maiden revenue, incurring a Rs 107 crore loss. The platform, which initially offered a broad range of categories on the ONDC platform, has since shifted its focus to food and grocery delivery, exiting other segments like fashion, electronics, and general groceries.

The change in strategy brings it in a direct competition with established players like Zomato and Swiggy, though it partners with third-party logistics providers such as Shadowfax and Dunzo to manage deliveries.

The lending arm, operating under PhonePe Lending Services Private Limited, reported a turnover of Rs 66 crore at a Rs 128 crore loss. Some signs of strategic change are also visible in the lending business, following the RBI's stance on unsecured loans, which may lead to a further slowdown. Nevertheless, for PhonePe, lending remains one of the few verticals expected to generate cash from the outset, according to CEO Sameer Nigam.

PhonePe recently launched secured lending products across housing and two-wheeler finance in partnership with NBFC L&T Finance, expanding its loan distribution offerings, which include tie-ups with Tata Capital, Hero FinCorp, and others.

Also read: PhonePe doubles down on financial services; CEOs appointed for lending, insurance and wealth businesses

The gestation period

Nigam has previously said that each of the group's new businesses is structured as a different company with separate CEOs. Moreover, the company has invested over Rs 800 crore into these businesses over the last year alone, with more than half allocated to its insurance broking arm.

While losses remain high in these nascent ventures, PhonePe anticipates that these businesses will scale and contribute meaningfully to the group’s overall revenue in the coming years.

“…each business has its own gestation period and needs branding, marketing, cashbacks at the beginning of growth, except for the lending business, which generates cash from the beginning,” founder and CEO Sameer Nigam had earlier told Moneycontrol.

To be sure, profit/loss figures for these businesses do not include other comprehensive income, which may affect the overall financial performance.

PhonePe turned a profit for the first time in FY24, excluding employee stock options (ESOPs) expenses. On a standalone basis, it reported an adjusted profit of Rs 710 crore, a sharp turnaround from the Rs 738 crore loss in the previous year. Consolidated profit stood at Rs 197 crore, a significant improvement from the Rs 194 crore loss in FY23.

The company’s standalone operating revenue doubled to Rs 4,910 crore in FY24, driven by the booming payments segment. On a consolidated basis, the PhonePe Group recorded a revenue of Rs 5,064 crore, reflecting a 74 percent year-on-year growth from Rs 2,914 crore in FY23.

The payments business, which processes over 770 crore transactions monthly with an annualized total payment value of Rs 10.5 lakh crore (around $1.5 trillion), remains the primary engine of profitability.