Phonepe gears up for IPO, eyes $10-bn valuation
Walmart-owned digital payments firm Phonepe has started gearing up for an initial public offering (IPO) by 2023 and is eyeing a valuation of $7-10 billion.
The company’s foray into financial services is going to play a key role in the firm becoming profitable and going public.
“The Walmart leadership has told Phonepe and Flipkart about building the ‘path to profitability’ and Phonepe has set a target to be profitable by 2022,” said a person with knowledge about Phonepe’s IPO plans.
“All employees at Phonepe have started working towards that goal. The company is partnering and providing valueadded services to kiranas and on-boarding merchants,” said the person, adding Phonepe quickly diversified into financial services after the government’s zero MDR (merchant discount rate) move, which has hit the payments industry.
Sources said Phonepe is planning to go public as a separate entity and may do it in the
US or India, depending on market conditions. Flipkart, too, is planning to go public in the US by 2022, they said.
A report by US investment bank Morgan Stanley in 2019 valued Phonepe at $7 billion. Sameer Nigam-led Phonepe, which started with peer-to-peer money transfer to becoming a super app, enabling food delivery to book a cab, is deepening its penetration into financial services, whose size could touch around $340 billion in
the next few years. It is competing with Amazon Pay, Paytm, and Google Pay.
In the past four months alone, it has added six products in insurance and wealth management. The company said it became the fastest-growing insure-tech distributor in India, and mutual funds (MFS) have seen investment from more than 5,000 cities.
“When we launched the Phonepe app in 2016, we created India’s first payments platform.
We then went on to launch Phonepe Switch in 2018,” said Sameer Nigam, founder and chief executive officer, Phonepe.
From the past few months, Phonepe has been building partnerships with industry leaders in insurance, MFS, and gold to launch tailor-made offers for its rapidly increasing customer base. “Since January, we have been launching a wide range of financial services products in all these categories, and will continue to innovate, scale
up, and positively disrupt these sectors,” said Nigam.
In April, Phonepe launched a coronavirus hospitalisation insurance policy. For this, it partnered Bajaj Allianz General Insurance. With domestic travel resuming, the firm rolled out domestic travel insurance in June. It offers cover for unlimited trips for a year, unlike traditional products that need to be purchased. In July, the firm launched “hospital daily cash”, an affordable sachet-based group insurance product. The same month, it unveiled vectorborne disease insurance.
This year, the company also launched Super Funds, which will help investors in identifying top equity, and gold and debt funds of MF companies.
Phonepe said its business came back to pre-covid levels in June, and had achieved an annual total payment volume run rate of over $200 billion, while clocking 620 million transactions in July.
Sources said Phonepe’s parent company Walmart is also providing a lot of support to the firm for its IPO plans.
“This is a time when there’s so much of opportunity that the size of the (prize) in India is significant. We want to make sure we’re on our front foot and aggressive,” said Doug Mcmillon, president and chief executive of Walmart, during a conference call to discuss the firms’ second-quarter earnings, this month. “Over time, I think everybody will understand just how valuable that business in India is, whether it’s the Flipkart portion or the Phonepe portion.”