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PhonePe secures $200m investment from Walmart, becomes India's most valuable fintech firm

The long-term outlook for Indian startups promising as digitalization continues to grow

17 March 2023


Kunal Tyagi

India produced 3X more unicorns than China in 2022.png
  • Walmart has contributed $200 million to PhonePe's fundraising round, raising its overall worth to $12 billion.

  • The company intends to utilize the funds to expand its portfolio of services, including account aggregation, loans, stockbroking, insurance, and wealth management.

  • Walmart continues to have a controlling stake in PhonePe and aspires to increase its retail presence in India.

Walmart has contributed $200 million in principle capital to the Indian company PhonePe as part of a fundraising effort to achieve $1 billion overall. The business, which will split from major online retailer Flipkart in late 2022, has just received $650 million, valuing it at $12 billion. The innovative investment round elevates PhonePe to the position of India's most valuable fintech business. Walmart, which acquired a majority stake in PhonePe in 2018, will continue to own a majority stake in the business. With the additional funding, PhonePe intends to expand into new industries including insurance, wealth management, lending, stockbroking, and account aggregators.

PhonePe is now vying with Paytm and Google Pay for market share in India's booming digital payments industry, which has held strong despite the country's typical financial iciness. Experts attribute this resiliency to entrepreneurs' desires to obliterate the financial services sector as well as the growing repute of online payments. The plan by PhonePe to expand its lending services is seen as a calculated move to take advantage of legislative developments in the Indian financial services sector.

CEO and founder Sameer Nigam expressed his excitement for the company's growth as it builds new options for Indian customers and merchants and promotes financial inclusion throughout the country. The goal of PhonePe is to accelerate the upswing in UPI repayments in India, including UPI light and Credit on UPI. The company hasn't revealed Walmart's innovative investment in PhonePe.

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For India's IT industry, which is trying to build on the momentum produced by the most recent government-led reforms aimed at creating a more favorable climate for entrepreneurs, the investment announcement is significant. Last month, Nirmala Sitharaman, India's finance minister, unveiled an INR100 billion ($1.3 billion) fund to support venture capital investment for the nation's entrepreneurs. Despite this, the Covid-19 outbreak has further disrupted the market, and the Indian IT sector continues to struggle with access to talent and funding. Analysts concur that given the country's ongoing digitization, the long-term outlook for Indian entrepreneurs is positive.

The investment in PhonePe is a component of Walmart's larger strategy to expand its presence in India's rapidly expanding retail sector. Walmart paid $16 billion for a controlling share in Flipkart in 2018 and has since viewed the move as a key step in developing its online presence in India. Walmart announced a deal in February of this year to purchase a 70% share in the online cosmetics shop Nykaa for $4 billion, giving the American retailer access to India's expanding beauty sector. Reliance Retail, India's largest retail chain, and Walmart are reportedly in talks about a workable relationship that would involve the two companies working together on e-commerce activities.

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