Bangalore-based Unified Payments Interface (UPI) PhonePe recently announced that it will be “partially” spinning off from Flipkart (acquired by Walmart) to spearhead a focused effort to be India’s biggest UPI. The partial spin-off is said to have been developing for over a year and will reduce Flipkart’s stake in the company from 100% to 87%.
In an unnamed round led by Walmart, the partial spin-off received financing at a sum of $700 million which will help the company directly compete with Google Pay and Amazon Pay. The company’s valuation now stands at $5.5 billion; a relief to investors after the company struggled to raise funds resulting in a $3 billion valuation early this year. This is a marked improvement from the company falling short of its goal of raising $1 billion at a valuation of $10 billion last year. The round is said to have participation from some existing investors. PhonePe has shared that Flipkart will stay on as the company’s majority shareholder retaining a close collaboration.
Founded by three former Flipkart employees, PhonePe translates to “on the phone” in Hindi. The company recently crossed its 250-million registered user milestone and was the most downloaded app in India in November of this year. Over 100 million monthly PhonePe users generated just shy of 1 billion digital payment transactions in October alone. In October, Google Pay and PhonePe together accounted for 86% of total UPI transactions in the country. Currently it has surpassed Google Pay to be the top payments app. UPIs are a payments infrastructure developed by India’s largest banks four years ago. Today, it is the most popular way to transact money digitally in India.
Speaking on the investment, Sameer Nigam, Founder and Chief Executive of PhonePe said, “This partial spin-off gives PhonePe access to dedicated long-term capital to pursue our vision of providing financial inclusion to a billion Indians.” It has also been shared that the partial spin-off will aid the company in increasing its value to nationals as it transitions toward the next phase of development. With the funding, the company is also looking to expand beyond India now that it’s grabbed the top UPI position in the region. Also on the table is an IPO in as little as three years.
Despite the company’s ambitions and recent success, no doubt it won’t be an easy road maintaining its position at the top as giants like Amazon, Google, and Facebook-owned WhatsApp ramp up their efforts to claim a majority in what has been estimated to be a $1 trillion market by 2023.