PhonePe’s super-sized fundraise

Hi friends 👋,

Happy Wednesday and welcome to the 4th edition of Weekly Olio.

Many thanks for your overwhelming support and encouragement. 🥳🎉 

We received multiple requests to include a short brief about our current professional engagements. So, here we go. We have literally kept it brief. 😁

• Peeyush Jain (Linkedin): Strategy @TATA Neu - Super app from the Tata Group; Previously at Shopee, Bain.

• Mohit Garg (Linkedin): Founder @Mezink - social-led growth for creators, professionals and brands; Previously at Uber, BCG.

Now, back to the interesting stuff! 🤓

Today’s, Publisher’s Parmesan covers PhonePe, one of India’s fintech giants, and its attempt to raise a Herculean round defying the current global sentiment.

For context, PhonePe is one of India’s leading payment apps that allows you to use wallets, UPI, credit card or debit card to recharge your mobile phone, pay all your utility bills and make instant payments at offline/ online stores. You can also invest in mutual funds and buy insurance plans on PhonePe.

Let’s get to it.

The Quote󠀢 💭

The Tweet 🐦

Fundamentals are rarely in vogue, but they're never wrong. Recessions just make you snap back to them. 🦉

The Infographic 💹

But why BigBasket? Quite a brand recall it seems! 😅

Credits: Livemint

The Short Read 📝

Welcome to the Ambaniverse - by Rest of World 

Scroll down and take an illustrated journey through the lives of ordinary Indians — and the many, many ways in which Ambani touches their world.

Fascinating, right? From food to gadgets to cricket, how one billionaire dominates every aspect of life in India. 🛍

The Long Read 📜

Lessons from Morgan Housel’s quest to sell his breakthrough book ‘Psychology of Money’ - by Leslie Albrecht

‘No one is going to read this book’, publishers said when Morgan Housel pitched them his book on personal finance titled ‘The Psychology of Money’. Since then, it has sold more than 2.2M copies worldwide and has consistently ranked as one of Amazon’s best-selling money-related titles.

Based on a typical book contract, Morgan Housel has probably made nearly $5 million off his book —the book that nobody was going to read... 🤑

Publisher’s Parmesan 🧀

PhonePe’s super-sized fundraise

We all know, the current market conditions are frosty. But as companies struggle for funding and go into cash-conservation mode, PhonePe is set to defy all odds with a $1B round.

The latest round is expected to see new investor General Atlantic chip in with $250 Mn, while the remaining $750 Mn is expected to come from the American retail giant Walmart.

The deal is a complex one, with the primary investment only possible once PhonePe changes its domicile from Singapore to India. This marks one of the first such moves by a unicorn — a significant development for the Indian startup ecosystem.

This funding round stands out for a few other reasons:

• It will be the largest fundraise by an Indian startup in 2022, and also one of the largest rounds globally.

• After this round, the valuation of PhonePe will more than double to $12 Bn (from $5.5 Bn currently). This comes at a time when most tech startups are finding it hard to justify even their existing valuations.

• For General Atlantic, this round comes around a decade after it passed on Flipkart in 2012. The private equity major has a fintech portfolio that includes Billdesk and Acko in India, as well as Ant Financial globally.

Interestingly, while this round doubles PhonePe’s valuation, Paytm, its listed competitor, continues to get punished in the public markets.

• Paytm’s market cap dropped by more than 65% since its listing.

• While PhonePe’s latest round values it at 59x of the last 12 months’ revenues, Paytm currently trades at a revenue multiple of 6X.

This gap in valuation is important to note for a few reasons:

• While Paytm is way ahead of PhonePe in terms of revenue, PhonePe’s revenue is growing a lot faster. In the year ended March 2022, PhonePe saw year-on-year revenue growth of 138% compared to Paytm’s growth of 77% in the same period.

• Beyond payments, PhonePe has stuck to being a distribution channel for final services players instead of seeking major licences on its own, be it in insurance or banking. Paytm, on the other hand, built everything by itself, from lending to movie ticket sales. It started wealth management services called Paytm Money, via a separate subsidiary. Its application to be an insurance provider, though, is understood to have been turned down.

• As per public filings, lending is a major focus area for Paytm but PhonePe is yet to start betting on the lending business in any meaningful way. But this could change - The Economic Times recently reported that PhonePe is in advanced discussions to acquire buy-now-pay-later player ZestMoney in a “distress sale.”

As the product baskets of both PhonePe and Paytm mature, it will be interesting to see who comes out on top. And PhonePe must demonstrate that it can continue to deliver to justify being India’s most valuable fintech company.

That’s all for this week. If you enjoyed this edition, we’d really appreciate if you shared it with a friend, family member or colleague.

Also, let us know which story/ sector you’d like to see us cover next 👇

We’ll be back in your inbox 2 pm IST next Wednesday. Till then, have a productive week!

Peeyush and Mohit

Disclaimer: The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author's employer, organization, committee or other group or individual.