Morgan Stanley values Flipkart’s payments arm PhonePe at $7b: Report

PhonePe co-founder Sameer Nigam. Photo: Mint

Flipkart-owned payments company PhonePe has been valued at a starkling $7 billion by Morgan Stanley in its latest report, which also said that PhonePe has been the key factor for driving up Walmart’s share price.

PhonePe was reportedly valued at a little over $1 billion in its last funding round.

In a bull case, PhonePe could be worth as much as $20 billion, The Times of India reported quoting Morgan Stanley. Walmart’s share prices could go up to $125 in the base case and $165 in bull case, the report added.

The American retail giant’s shares were at an all-time high of $118 on Thursday.

With Indian payments space bracing for a growth of over 20 per cent in the next four years, PhonePe could turn out to be the biggest value creator for Walmart, which bought a controlling 77 per cent stake in its parent company, Flipkart, for $16 billion last year.

Quoting Morgan Stanley, the report further said PhonePe could garner revenues of about $1.4 billion (base case) from its foray into financial services business alone. The company is already operating in the mutual funds’ segment, and plans to further broaden its wealth management portfolio.

PhonePe was founded in 2015 by former Flipkart executives Sameer Nigam, Rahul Chari, and Burzin Engineer. It was, however, acquired by Flipkart within a year. Flipkart’s board is reportedly looking to spin off PhonePe into a separate entity and is exploring to raise $1 billion from outside investors at a valuation of as much as $10 billion.

At $10-billion valuation, however, PhonePe would still trail arch-rival Paytm, which is valued at over $15 billion.

PhonePe claimed to have emerged as a market leader driving the highest number of merchant UPI transactions in August by driving over 343 million transactions. Further, it claims to have deployed QR code across 6.5 million merchants across 210 cities in India.

Other players operating in the Indian digital payments space include Google Pay and Amazon Pay, both of which are vying to capture a larger share of the market. The competition is only going to get intense with the entry of global messaging giant WhatsApp into payments. The Facebook-owned app has about 400 million users in India.