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Flipkart gives free rein to PhonePe to raise external funds

Mar 27, 2019 by The Passage Team
Flipkart gives free rein to PhonePe to raise external funds

PhonePe may soon be able to raise fresh funds from external investors.

Walmart-owned Flipkart has agreed to spin off its payment service PhonePe, which can now create a separate board and raise money by divesting shares, said a Times of India report, citing company sources.

The three-year-old payments company is looking to raise up to USD 1 billion in external capital.

Over the last couple of years, PhonePe has been locked in fight with Paytm, Mobikwik and Google Pay to grab a bigger share of India’s more than 400 million smartphone users. With the entry of WhatsApp payment last year, the fight has intensified.

India’s Unified Payment Interface (UPI) has leveled the playing field for the payments companies by enabling instant transfer of funds between two bank accounts on a mobile platform, making the core wallet services irrelevant. Home-grown wallet companies had no choice but to integrate UPI on their platform. PhonePe was the first to do so.

PhonePe is a ticket for Tencent (an existing investor in Flipkart) to claim India’s rapidly growing digital payments market, poised to touch USD 1 trillion by 2023, against Alibaba-backed Paytm. According to sources, the Chinese tech giant and online retailer’s co-founder Binny Bansal (who holds about 4% share in Flipkart), along with a few bulge-bracket private equity funds, have shown interest in the company.

The approval came a few weeks back, following which PhonePe committed Rs 500 crore for marketing and product promotion over the next year. The company plans to use the Indians’ love for bollywood and cricket to promote the payment service beyond metros and tier 1 cities.

The payments firm has brought on board actor Amir Khan as a brand ambassador. Earlier this week, it sported a full page advertisement in the country's largest national daily Times of India, offering users a chance to win a trip to England to see India play in the 12th edition of the Cricket World Cup this summer.

PhonePe was founded in December 2015 by ex-Flipkart executives Sameer Nigam, Rahul Chari and Burzin Engineer and was acquired by Flipkart four months later. So far, the company has received a total USD 500 million from Flipkart committed at the time of the acquisition. PhonePe claims to have 150-million users and has processed more than 225 million UPI transactions in February.

“Scaling up PhonePe and competing against global giants in the payment space such as Google and PayPal is not in Walmart's long-term strategy. Over time, Flipkart will fully divest its stake in PhonePe,” said the report citing a source.

The Passage Team

The Passage is committed to creating in-depth content over technology industry across Asia with a focus on emerging startups in the technology, healthcare, education, food, tech, travel & mobility segments.

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