PhonePe has grown into one of India's leading digital payments companies.
Business
Standard : When Walmart Inc paid $16 billion for control of
India’s e-commerce pioneer Flipkart Online Services Pvt last year,
the American retail giant got a little-noticed digital payments
subsidiary as part of the deal. Now the business is emerging as one
of the country’s top startups, a surprise benefit for Walmart from
its largest-ever acquisition.
Flipkart’s
board recently authorized the PhonePe Pvt Ltd. unit to become a new
entity and explore raising $1 billion from outside investors at a
valuation of as much as $10 billion, according to people familiar
with the matter, asking not to be named because the discussions are
private. The funding may close in the next couple of months, although
the talks are not finalised and terms could still change, they said.
The unit would then become independent with a distinct investor base,
although Walmart-owned Flipkart would remain a shareholder. Walmart
and Flipkart didn’t respond to emails seeking comment.
PhonePe
-- which means “on the phone” in Hindi and is pronounced “phone
pay” -- has grown into one of India’s leading digital payments
companies. Its volume and value of transactions have roughly
quadrupled over the past year as the country’s consumers adopt the
technology to transfer money digitally to businesses and each other.
PhonePe is gaining ground on Paytm, which leads the field and is
backed by Warren Buffett.
PhonePe
is an “underappreciated asset,” Edward Yruma, an analyst from
KeyBanc Capital Markets, wrote in a recent research note. He
estimated the business may be worth $14 billion to $15 billion,
separate from Flipkart’s e-commerce operation.
The
startup was founded in December 2015 by three friends who left
Flipkart to get it off the ground. Within a year, Flipkart founders
Binny Bansal and Sachin Bansal decided to acquire PhonePe, realizing
that solving payments friction would make it easier for consumers to
buy online. Less than a year later, the Indian government made the
unprecedented move to ban large banknotes to curb corruption and
boost digital transactions. With this “demonetization,” Paytm,
PhonePe and other fledgling services flourished.
Cheap
smartphones and cut-rate wireless data plans have brought millions of
Indians online in the years since, boosting the whole industry. In
June, the PhonePe app reached 290 million transactions with an
aggregate value of $85 billion, compared with 71 million transactions
at $22 billion a year earlier, according to the company.
