PhonePe prepping for IPO; seeks valuation of USD 8-10 billion

PhonePe, part of the Walmart Inc-controlled Flipkart group, is considering to raise funds through an initial public offering for expanding its financial services portfolio and deepening its core United Payments Interface (UPI)-based payments operations, investment banking sources said on Wednesday.

The digital payment company is seeking a valuation of USD 8-10 billion, they added.

According to the sources, the company will soon engage with bankers and legal consultants to take forward the IPO (Initial Public Offering) process.

Also, the company has initiated plans to move its registered holding entity from Singapore to India, underlining its ‘made in India’ credentials. PhonePe’s board has already ratified the proposal to move the holding company to India.

The company will list on Indian stock exchanges as opposed to many startups that prefer to incorporate overseas, primarily Singapore or the US, chasing relatively friendlier tax laws and business regulations there.

PhonePe was founded by ex-Flipkart executives Sameer Nigam, Rahul Chari and Burzin Engineer, and was acquired by Flipkart in 2016. In 2018 Flipkart was acquired by Walmart, and PhonePe was part of the transaction as well.

The company plans to go public once its core businesses turn profitable, which it hopes to achieve by 2023, investment banking sources said.

In addition, PhonePe plans to raise its workforce strength to 5,200 by the end of December to ride on the growing UPI-based transactions in India.

The company has 2,600 employees and 2,800 open job positions across cities such as Bengaluru, Pune, Mumbai and Delhi.

PhonePe had last raised USD 700 million in 2020 led by its promoters Flipkart and Walmart at a valuation of USD 5.5 billion. The digital payment company has raised a total of USD 1.7 billion in funding over 13 rounds including Tiger Global Management and Tencent as investors.

The company has applied for a mutual fund license and a Non-Banking Financial Company (NBFC) license and has acquired three companies –- WealthDesk, OpenQ, and GigIndia. PhonePe is the leader in the UPI space, enjoying a 47 percent market share in monthly transactions.

At present, PhonePe holds a mutual fund distribution licence, and will be adding stocks and exchange-traded funds to its growing list of wealth management products.

It announced that it will launch UPI SIP (Systematic Investment Plan) for investment in gold. Users will be able to invest in high purity 24K gold of a specified amount every month. The gold can be accumulated in their insured bank-grade lockers, maintained by MMTC-PAMP and SafeGold.

PhonePe was also in the process of integrating its processes with the Open Network for Digital Commerce (ONDC) pilot, India’s indigenously created open source e-commerce network, with real-time transactions in the retail and food delivery space starting in some cities.

Under ONDC, real-time transactions in the retail and food delivery space have started in some cities such as Shillong and Delhi. Currently, ONDC is focusing more on retailers and restaurants.

Recently, a number of internet-led businesses launched their IPOs, including Zomato, CarTrade, Nykaa, Paytm and PolicyBazaar.