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Exclusive: PhonePe receives $38.7 mn infusion from parent Flipkart

04 October, 2017

PhonePe Pvt. Ltd, the unified payments interface-based payments app from homegrown e-tailer Flipkart, has received Rs 254.43 crore ($38.7 million) in a fresh round of funding from its Singapore-based group entity, Flipkart Payments Pvt. Ltd.

According to the filings with the Ministry of Corporate Affairs, the company raised the money on 31 August through the allocation of 1.76 million equity shares at a subscription price of Rs 1,445.29 apiece, indicating a significant bump.

Previous filings show that PhonePe had received Rs 83.68 crore in October 2016 by allocating 4.18 million equity shares at Rs 200 apiece. In April last year, it had received Rs 102. 94 crore against 5.42 million shares at a subscription price of Rs 190 apiece.

While Flipkart Payments, a subsidiary of the Singapore-based umbrella entity Flipkart Pvt. Ltd, has a controlling stake in PhonePe, another group entity Flipkart Logistics Pvt. Ltd, is also a shareholder in it.

In an e-mailed response, PhonePe co-founder and CEO Sameer Nigam said the company will use the funds to expand its team and scale up marketing efforts.

Delhi-based PhonePe, formerly FX Mart Pvt. Ltd, was acquired by Flipkart in April 2016. It has another associated entity, PhonePe Internet Pvt. Ltd, which is based out of Bangalore. It is, however, not clear how distinct these two entities are in terms of operations.

The recent funding for PhonePe comes days after Flipkart received a mega fund infusion of $2.5 billion from marquee investor SoftBank in August. In April, it had raised $1.4 billion from Microsoft, Tencent and eBay Inc, in a transaction that also saw it acquire the Indian operations of eBay.

PhonePe is rapidly scaling its operations following impressive growth numbers in recent times. The company had claimed to have overtaken Bharat Interface for Mobile (BHIM) app in terms of total transactions with a 45% share in August. Likewise, its monthly transactions, which grew 800% since December 2016, translated into an annual payment volume of $2.5 billion in July.

Nigam said the company is growing nearly 100% every two months. The PhonePe app has about 25,000 offline merchants and 100 billers. It has integrated around 30 of the top 100 online merchants on the app. “We are scaling up to add more merchants both in the online and offline space,” he said.

Rahul Chari, the co-founder and CTO of PhonePe, had told VCCircle recently that it was clocking 10 million transactions every month and hoped to double it soon.

It is also working on the launch of a more seamless payments solution with UPI 2.0, which will have the ability to create e-mandates or standing instructions, besides foraying into wealth management as well as in cross-selling and up-selling of financial products soon.

In July, VCCircle had reported that PhonePe had rolled out its payment solutions for offline commerce, following a soft launch in June. The company’s payments solutions have been adopted by over 25, 000 merchants.

Though PhonePe was a rather late entrant into the payments space, it was one of the earliest adopters of the UPI-based transaction platform. However, payments, as a sector is still maturing and there have been no well-defined rules as yet to pick out a clear market leader.

In an earlier interaction, Anup Jain, managing partner at consumer and retail research firm Redback Advisory Services, had said that cheque transactions have fallen 20% from the levels of 2012-13, while UPI transactions have risen from Rs 90 crore in November 2016 to Rs 3,070 crore in June.

For Flipkart, PhonePe solves a crucial piece of puzzle in addressing the problem with an integrated payment solution that is also seamless. Industry experts, however, believe that wallets will continue to remain a significant part of Flipkart, Amazon and Paytm’s strategy to acquire and retain consumers.

“This gives Flipkart more ways of gathering consumer data and revenue generation in the process. It will also use the Phonepe platform for offering refunds, payment discounts and cashbacks, besides making online payments an attractive proposition for customers and reduce cash-on-delivery,” said Satish Meena, senior forecast analyst at Forrester Research.

Meena also said that the payments arms of all e-commerce majors will continue to receive more fund infusions. VCCircle had earlier reported that Flipkart’s deep pocketed rival Amazon was also all set to pump in fresh funds into Amazon Pay, its payments arm

In the recently-concluded festive sales event conducted by e-commerce majors, Phonepe had offered 10% cashback on consumer purchases, while Amazon Pay offered 20% cashbacks besides schemes like ‘buy now pay next year’ and no-cost EMIs. Paytm was also not far behind with a significant Rs 501 crore allocation for cashbacks alone.

*This article has been updated to include PhonePe CEO’s comments.

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Exclusive: PhonePe receives $38.7 mn infusion from parent Flipkart

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