Walmart's PhonePe seeks to raise $300-$400 mn from General Atlantic, others

The new investment is likely to close in a few weeks and help the payments firm compete with Google Pay, Paytm, and Amazon Pay in the Indian fintech space

Walmart-owned fintech firm PhonePe is in talks to raise $300-$400 million from new and existing investors, including General Atlantic, at a pre-funding valuation of $12 billion. The new investment is expected to close in a few weeks, say sources. It follows the recent $100 million in primary capital from Ribbit Capital, Tiger Global and TVS Capital Funds and $350 million in a funding round led by General Atlantic. The infusion comes at a time when startups are facing a funding winter and macroeconomic uncertainty.

“The conversations are going on and the deal may be announced in a few weeks,” said a person familiar with the matter.

PhonePe has started its latest fund-raise and hopes to garner up to $1 billion in capital, post its domicile shift to India. With two funding tranches this year, it has already raised $450 million. The firm expects further investments from leading global, and prominent high-net-worth Indian investors in due course.

Flipkart co-founder Binny Bansal is also in talks to invest $100-150 million in PhonePe as part of an ongoing financing round at the digital payments company, say sources. “Binny Bansal has been an early backer of PhonePe and is also on the company board,” said a person. “Talks between PhonePe and Binny to raise money are still at a premature stage.”

PhonePe didn’t answer Business Standard’s request for comment.

In January, PhonePe raised $350 million in funding from General Atlantic at a pre-money valuation of $12 billion, making the Bengaluru-based most-valued financial technology (fintech) player in India. Other investors that backed PhonePe included Qatar Investment Authority, Microsoft, Tiger Global and a couple of smaller hedge funds.

PhonePe competes with players such as Google Pay, Paytm, and Amazon Pay in the Indian fintech space, which is expected to touch $350 billion in enterprise value by 2026, according to a report by Bain and Co.

PhonePe plans to use the funds to scale its payments and insurance businesses in India. It will also launch and aggressively scale new businesses like lending, stockbroking, insurance and wealth management and Open Network for Digital Commerce or ONDC-based shopping and account aggregators over the next few years.

PhonePe is also set to acquire fintech start-up ZestMoney for $200-300 million, according to sources.

The firm on Saturday said that it has hit an annualized TPV (Total payment value) run-rate of $1 trillion (Rs 84 trillion). This growth is powered by PhonePe’s leadership in the Unified Payments Interface (UPI) space where it holds over 50 per cent market share by value. The company has successfully digitized over 35 million offline merchants spread across Tier-2,3 and 4 cities and beyond, covering 99 per cent pin codes in the country.

PhonePe has also received in-principle approval for its PA (payment aggregator) license from the RBI. This approval will allow the company to scale its simplified payment solutions, and enable digital inclusion for millions of small businesses and SMEs in the country.

PhonePe also recently launched a service that will allow its Indian users traveling abroad to pay foreign merchants using UPI. 'UPI international' supports merchant outlets in UAE, Singapore, Nepal and Bhutan that have a local QR (quick response) code. Users will be able to make direct payments in foreign currency from their banks in India, like they do with international debit cards. The firm said it is the first Indian fintech app to launch the service.

The PhonePe Group was acquired by the Flipkart Group in 2016 and is now India's largest digital payments platform. The company has more than 440 million registered users.

During an investors conference recently, John David Rainey, chief financial officer and executive vice president, Walmart, Inc,  said that India is likely to surpass China and emerge as the largest international market for Walmart this year. He said that in India, both Flipkart and PhonePe are exciting opportunities and they have large portions of the market share in the country.

Last year in December, e-commerce giant Flipkart and PhonePe announced the full ownership separation of the digital payments platform, setting the two businesses to chart their own paths and unlocking enterprise value for shareholders.

However, PhonePe’s investors had to pay about Rs 8,000 crore in taxes to allow the fintech firm to domicile in India from Singapore.