PhonePe gets fresh infusion from parent as competition heats up

PhonePe, the digital payments arm of Walmart-owned e-commerce giant Flipkart, has received the first capital infusion of 2019 from its parent amid growing competition in the segment.

Singapore-based group entity PhonePe Pvt. Ltd (formerly Flipkart Payments Pvt. Ltd) has pumped $107.7 million (Rs 743.50 crore) into the Indian unit, show filings with the Ministry of Corporate Affairs.

As a standalone entity, the latest infusion values PhonePe at $1.07 billion (Rs 7,440.10 crore)

This is the second time that the parent has provided capital to PhonePe since US retail behemoth Walmart announced its acquisition of Flipkart in May last year.

Flipkart had invested $66 million (Rs 451 crore then) in PhonePe last August, $47.4 million (Rs 324.90 crore then) in April and $75.6 million (Rs 518.22 crore then) in March.

The latest investment is likely to be part of the $500-million commitment to PhonePe that Flipkart had announced late last year.

PhonePe, which claimed to have crossed a billion transactions in terms of volume last December, said that the platform drives 70% of overall merchant transactions on the Unified Payments Interface (UPI) mobile payment system. The firm claimed in January this year that it had grown its offline merchant base to more than 1 million.

PhonePe competes with the likes of Paytm and Amazon Pay, both of which are vying to capture a sizeable portion of the consumer wallet market in India.

The entry of global players such as Google and Xiaomi has further heated things up in the segment.

Earlier in the day, online media publication Entrackr cited people it did not name as saying that Tencent-owned WeChat was foraying into the UPI-based payments space with WeChat Pay.

As part of its efforts to strengthen its offline network as well as to simplify merchants’ billing, payments and inventory management systems, PhonePe had acquired Tiger Global-backed point-of-sale platform Zopper for an undisclosed sum last July.

Last December, TechCircle reported that PhonePe had launched a wealth management unit to offer personal finance and services including investment planning, real estate planning, tax planning and portfolio management.

For the financial year 2017-18, PhonePe Pvt. Ltd registered a 14-fold rise in revenues and incurred significant cash burn. The firm’s operating revenues grew to Rs 42.79 crore, up from Rs 3.02 crore in the previous year.

However, the significant growth also came on the back of a significant cash burn. For 2017-18, gross expenses rose nearly six-fold to Rs 840 crore, up from Rs 146.34 crore in the year before that.

Consequently, net losses widened to Rs 791.03 crore, up from Rs 129.01 crore in the previous year.