KKR, General Atlantic may invest in Phonepe
FRESH FUNDS PE firms Tiger Global, Tencent are also likely to invest in Phonepe
BENGALURU: Private equity (PE) firms KKR & Co. and General Atlantic LLC have expressed interest in investing in Flipkart’s digital payments arm, Phonepe Pvt. Ltd, two people familiar with the matter said.
Some existing investors of Walmart Inc.-owned Flipkart such as Tiger Global and Tencent are also likely to invest in Phonepe, t he people said, requesting anonymity.
They said that Walmart is yet to finalize a plan to spin off Phonepe and may still decide against it. Also, Walmart will retain a majority stake in Phonepe even if it is spun off as an independent unit, they added.
“KKR is exploring a potential investment in Phonepe,” said one of the people cited above. “This is part of the PE firm’s strategy to add more tech-focused investments in its India portfolio.”
The interest from the PE firms comes at a time when Phonepe is looking at a valuation of $10 billion, one of the people cited above said. The figure is a sharp rise from the $1.5 billion that Phonepe was valued at when Walmart bought a 77% stake in the Bengaluru-based online retailer Flipkart for $16 billion last year.
A surge in India’s digital payments business and a funding boom in the start-up ecosystem could be key factors driving the high valuations but it is unclear whether Phonepe would be able to attract investors at such lofty levels.
Phonepe is looking to raise f Number of users Phonepe crossed in June 2018 Infused by Flipkart in Phonepe after it acquired the mobile payments business in April 2016 Phonepe has been trying to raise funds independently as it looks to compete with arch rival Paytm which is backed by Softbank
resh funds independently to cash in on the digital payments boom by extracting a high valuation and form a consortium of investors who can offer big doses of fresh funds it needs to win the payments war over the next few years.
Even if Phonepe achieves the $10 billion valuation mark, it would still trail arch-rival Paytm. Paytm as valued by investors at $16 billion after Warren Buffett’s Berkshire Hathaway invested $300 million in the Noida-based company last year.
A Phonepe spokesperson said, “These are just rumors. As a company policy, we don’t speculate on rumors.”
General Atlantic and Tiger Global declined to comment and KKR said they do not comment on market speculation. Tencent did not respond to queries as of Number of transactions on the app by December Commitment made by Flipkart to expand Phonepe
The platform has been in the process of expanding its offline presence for more than a year now to establish itself as a larger digital payments brand across the country
Walmart has been considering a plan to spin off Phonepe since last year, reported on October 1.
Founded by three former Flipkart executives Sameer Nigam, Rahul Chari and Burzin Engineer, the payments business has emerged as an integral part of Flipkart’s overall strategy. It was also an essential part of Walmart’s reason to invest in the Flipkart group last year.
The digital payments market in India has been booming with companies such as Paytm, Phonepe and Google Pay leading the charge. Digital payments in India are expected to exceed cash transactions by 2022, according to an IDC Financial Insights report.
Phonepe announced in December that the mobile pay- Number of offline and online merchants across food, travel, groceries and movie ticket segments, among others, who use Phonepe as a payment option
Apart from pushing its QR codes, Phonepe has also been expanding its point of sale (POS) terminals ments app had crossed a billion transactions. The app provides peer-to-peer transfer, recharges, bill payments, gold purchases, among others.
Phonepe last received an infusion of $175 million in October from Walmart, as part of the $500 million commitment made by Flipkart to expand Phonepe. The commitment was in addition to the $75 million infused by Flipkart in the mobile payments business since it acquired Phonepe in April 2016.
Apart from leveraging the UPI platform, Phonepe has been slowly proliferating into the offline space as it competes with Paytm. Phonepe claims to have over 1 million offline merchants on its platform. The company is also diversifying its offline offerings based on the requirements of the merchant.
India is a gas-starved country and imports almost half of its annual natural gas consumption.