Ribbit, Tiger Global, TVS commit $100m to India's PhonePe

The deal comes nearly a month after General Atlantic and other unnamed international and domestic investors put in USD 350m at a pre-money valuation of USD 12bn. The valuation is unchanged for the latest investment. Both tranches are part of a planned USD 1bn capital raise, which coincides with PhonePe's formal separation from e-commerce marketplace Flipkart, its former parent.

The company also chose to redomicile from Singapore to India. This reportedly landed Walmart – Flipkart’s owner – with a INR 78bn (USD 957m) tax bill as shareholders sold their stakes in the Singapore entity and invested in the Indian entity. However, it is an increasingly popular course of action among Indian technology companies that want to list domestically.

PhonePe said in a statement that the targeted USD 1bn would be used to scale up its payment and insurance businesses in India. There are also plans to enter areas like lending, stockbroking, account aggregators – licensed entities that facilitate financial information sharing – and online shopping under the open network for digital commerce (ONDC) protocols.

ONDC is a government initiative to standardise e-commerce transactions, making them cheaper and more accessible. This has already been achieved in payments through the united payment interface (UPI). In 2017, PhonePe became the first UPI-based app to surpass 10m downloads.

The company is now India’s largest payments app, with 435m registered users, or one in four Indians. It claims to have digitised 35m offline merchants spread across 99% of the country’s pin codes and to have established itself as a leader in the Bharat Bill Pay System (BBPS), processing over 45% of all transactions facilitated by the platform.

PhonePe expanded into financial services in 2017 by offering users various investment options. It has since launched several mutual funds and insurance products.

“We view this more as an opportunity in a population scale business for ‘New India,’ driven by an outstanding management team with razor-sharp focus, as driven by execution,” said Gopal Srinivasan, chairman and a managing director at TVS Capital Funds.

“PhonePe is the number one transaction platform in India with an impressive moat of robust tech capabilities. Its strong growth in financial services across payments, insurance, and lending with unopened doors to two massive opportunities through ONDC and Appstore, were key reasons in our investment thesis.”

The company was established in 2015 by Sameer Nigam, formerly a senior vice president for engineering at Flipkart, and several colleagues from the e-commerce marketplace. Flipkart acquired it a year later and made three investments totalling around USD 133m between 2017 and 2020. Flipkart remains the majority shareholder even after the recent external funding rounds.

The first of these rounds came in 2020 when PhonePe raised USD 700m at a post-money valuation of USD 5.5bn. Walmart, which had a majority interest in Flipkart two years earlier – led the round. Other investors were not disclosed, but they were all existing investors in Flipkart. The e-commerce giant counts Tencent Holdings, Tiger Global Management, and Microsoft among its backers.

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• Topics
• South Asia
• Expansion
• Financials
• Technology
• India
• Flipkart
• Growth capital
• Fintech
• TVS Capital Funds
• Ribbit Capital
• Tiger Global Management