Valuation strife halts PhonePe fundraising plan: Report

Digital payments firm PhonePe has been in talks with several large global investors, to raise up to $1.2 billion (Rs 8,500 crore), according to a Business Standard report.

Its proposal has not evoked much response, said Business Standard's sources.

The Walmart-owned firm was looking at a valuation of $10 billion, since the acquisition of Flipkart by Walmart in 2018, the report said.

PhonePe came to Walmart as part of the US retailer’s $16-billion acquisition of e-commerce firm Flipkart in 2018. According to its sources, Walmart prefers that PhonePe raises funding from outside investors to scale up operations and take on rivals such as Alibaba-backed Paytm, Google Pay and Amazon Pay, also eyeing India's payments and financial services market.

Yet, conditions such as lack of diversification, new e-commerce and data policies, and the overall investment environment, have slowed the process, the report said.

Besides, investors are not ready to give them this level of valuation, a reason why discussions are not making much progress, sources told the daily.

PhonePe was in talks with Tencent, US payments firm Visa, SoftBank, Naspers and even sovereign funds such as Qatar Investment Authority and Canadian Pension Plan, according to the report.

“If they had got the ($10 billion) valuation upfront, they would have raised the funding. From the past few months, they have slowed down the process itself. The challenge was that the investors had not given them this kind of valuation because they had not diversified and were only doing payments,” said the paper, quoting a person familiar with the fundraising plans.

“Also, the overall investment environment was a dampener. The acquisition of Flipkart, as well as the new data policies and their impact on getting into the broader fin-tech spaces other than payments, played a role," the source told Business Standard.

"As a company, we don't comment on funding speculation. Our investors remain very bullish on PhonePe's business prospects and continue to meet our capital needs. As we have said before, any external capital raise would only be for strategic purposes, and we are not actively looking to raise funds externally." a PhonePe spokesperson told Deccan Herald.