IPO only after achieving overall profitability: PhonePe CEO Sameer Nigam

We have raised $650 million as part of PhonePe's ongoing fundraise of up to $1 billion, said Sameer Nigam, CEO and founder of PhonePe

At a time when a growing number of tech firms have halted their expansion plans, fintech giant PhonePe is making new bets and is in an expansion mode, says Sameer Nigam, CEO and founder of PhonePe, in an interview with Peerzada Abrar.

The Walmart-owned firm which recently achieved a pre-money valuation of $12 billion in a mega funding round has launched a new Shopping app called “Pincode”, built on top of the ONDC platform. Nigam said Pincode is a new approach to e-commerce, which puts all the local stores and sellers at the heart of the digital shopping growth story. Edited excerpts:

What are the bets that PhonePe is making overall?

Pincode shopping app is one. We recently launched the Rupay credit card on Unified Payments Interface. I think that is a big market. We continue to expand our offering on insurance. You will see us entering health insurance soon. We are launching a couple more apps this year. We have got into account aggregator licence. We have introduced piloted merchant lending. There are a bunch of launches coming this year, which I cannot talk about right now.

What are PhonePe’s expansion plans?

We continue to expand in our five data centres and digital footprint there. We have also tied up with Microsoft Azure and are doing work there in different categories, especially on our app store and other businesses. In terms of hiring, we will continue to aggressively hire for the new businesses that we are opening up. By the year-end, we expect to reach about 6,000 people on full-time, on roll and separately have 1000 people as feet on the street.

PhonePe built Pincode on top of the ONDC platform. How big is the ONDC opportunity for you?

We only want to facilitate hyperlocal commerce. We are not an e-commerce company, but a technology platforms firm. The reason that ONDC makes sense for us is that there's a need to actually build out a really good shopping experience on the buyer side, while the heavy lifting is being done by the seller platforms and sellers themselves.

That we believe can only be done best in the context of a local environment. So, we will increase the number of categories depending on what kind of shops are available in the city.

We will also increase the number of cities, but that would be done more slowly. But we will not change the code nature of Pincode. The idea is to facilitate the digitization of local businesses and take them online. 

After the launch of Pincode, have you given up the focus related to being a super app platform and is there any kind of clash with Flipkart in the e-commerce space?

We have always said that we don’t like the word super app. PhonePe is a payment and financial services app and it continues to be that. Regarding the clash with Flipkart, I don’t think our business directly competes with Flipkart or Amazon. They are pan India and have probably the best logistics and supply chain. Their value proposition is at a very different level. Ours is trying to solve a very different problem. If you see during the Covid-19 pandemic, everyone was doing some kind of commerce within local communities using WhatsApp. We are trying to formalize that and make it more convenient.

PhonePe’s investors had to pay about Rs 8,000 crore in taxes to allow the firm to domicile in India from Singapore. How was that experience for you?

It (domiciling) took over a year because it is a complex transaction. We not only had to move our parent company to India but we also had to move all our subsidiaries to the country. Our investors paid Rs 8000 crores in tax largely led by Walmart, so a huge shout out to them. We had to align everyone for it. So (being) a highly regulated Indian business and at scale, based on the conversations with the regulators and government,  we felt the right answer for a business like ours, is that we should list in India eventually and the first step was to domicile.

How are your IPO plans shaping?

We are going to wait and watch as we are right now entering into new businesses. As a private company, we want to give these businesses some time to reach a certain level of maturity. We are thinking about revenue goals. We want to achieve overall profitability, and then we would go for an IPO. So, it (would take) a few years.

What kind of strategy did you adopt to raise large funding rounds amid a funding winter and macroeconomic uncertainty and has there been any impact on PhonePe’s valuation?

We have raised $650 million as part of PhonePe’s ongoing fundraise of up to $1 billion. A few more conversations are live and we hope to announce a few more investment rounds soon. I think we are on track to get to the $1 billion funding.

All of our investors including existing and new appreciate that our maniacal focus on customer service has helped us retain a substantial market share in our core business, which is translating into strong revenue growth. Last year also we had triple-digit revenue growth.

We always had a very high level of automation, which has kept our costs down and margins keep on improving and that is a good sign. Overall the global markets are in a (difficult situation) and tech stock and fintech stocks within that are getting hammered everywhere. Private market corrections have been strong. But PhonePe has achieved a valuation of $12 billion, it is a healthy number and we are very happy with it.

Some industry people are saying that PhonePe abandoned its intention to acquire the buy-now-pay-later (BNPL) platform ZestMoney, leaving the company in distress. How would you react to that?

We pursued five acquisitions last year. We successfully completed the fourth. The fifth didn’t go through, unfortunately, due to a reason that I can’t reveal. I think it would be unfair to say that we abandoned anybody. There is a due diligence process that you have to go through and sometimes these things happen. Clearly, four out of five acquisitions, is not bad. I don’t know what else to say if it didn’t work out.