PhonePe Invested Nearly A Third Of Funds Raised In FY24 On Financial Services, Consumer Tech

Walmart Inc.-promoted payment services provider, PhonePe, may have put its IPO on a slow burn, but that is not deterring the largest payments service provider in terms of market share from investing in newer tech businesses. In the last financial year, it diversified its business and increased investments into financial services and consumer tech.

The payment services provider, which moved its registration from Singapore to India to undertake an initial public offering, faced hurdles after the Reserve Bank of India announced it was considering a 30% cap on the market share of third-party payment providers on the Unified Payments Interface. PhonePe had a 48.4% market share by volume and 50.1% by value in UPI transactions in August 2024. With the last word yet to be said by the banking regulator, the IPO of PhonePe is in abeyance. This has led the company to invest in other businesses.

It invested Rs 522 crore in new tech and financial services businesses during the year.

It infused funds into PhonePe Insurance Broking Services and PhonePe Wealth Broking. It also started investing in Indus Appstore and Pincode in the consumer tech segment. These businesses are currently in the investment mode and will require further funds for growth.

PhonePe Insurance Broking had revenues of Rs 108 crore and loss of Rs 247 crore, while PhonePe Wealth Broking had revenues of Rs 24 crore and loss of Rs 134 crore at the end of financial year 2024.

In consumer tech, it had launched Indus Appstore for Android devices, challenging Google’s monopoly in the Android app store. Indus posted a loss of Rs 123 crore at the end of financial year 2024.

It also started Pincode, a facility to small businesses, providing real-time supply chain and access to hyperlocal e-commerce market. Pincode posted a loss of Rs 107 crore in FY24.

At the end of the financial year, the Walmart-owned company posted a consolidated loss after tax of Rs 1,996 crore, after accounting for Rs 2,193 crore of ESOP expenses.

The digital payment services provider posted a profit after tax, excluding ESOP expenses, at Rs 197 crore.

Consolidated revenue for the payment services maker rose to Rs 5,725 crore for the year ended March 2024, compared to Rs 3,085 crore in the previous year. Revenue from financial services stood at Rs 202 crore in fiscal 2024, compared to miniscule in the previous year.

The path to profitability is also because of reducing payment transaction incentives, that is, cashbacks and other incentives which stood at nearly Rs 950 crore in fiscal 2019 and fell to around Rs 15 crore in fiscal 2024.

On a standalone basis, profit excluding ESOP charges stood at Rs 710 crore.

During the year, PhonePe allocated 8.20 lakh shares to private equity investor General Atlantic at Rs 19,968 apiece, raising Rs 1,638.7 crore in the process. The stake sale valued the payments startup at Rs 88,407 crore, that is, around $10.5 billion. So far, investors, including Walmart, have invested Rs 18,000 crore in PhonePe. The parent held 89.05% in the company at the end of this fundraise.

The company invested Rs 97 crore in CE Info Systems for 18.86% stake, which is now valued at nearly Rs 2,172 crore, based on the share price on Oct. 21.

The company invested over Rs 2,800 crore in infrastructure capex for its operations.