PhonePe, the fintech giant transforming the digital payments landscape in India, is boldly moving into the stock broking arena. With its new app, “Share(dot)Market,” it aims to capture the attention of retail investors and change the game. Here’s the scoop:
PhonePe is taking on giants like Zerodha, UpStox, and Groww by launching Share(dot)Market under its subsidiary PhonePe Wealth Broking.
But why the sudden pivot to stocks? Read on to know the answer!
Phonepe story in a nutshell
Founded in December 2015 by Sameer Nigam, Burzin Engineer, and Rahul Chari, hailing from Bengaluru. PhonePe boasts a staggering 48 crore registered users and has digitised 3.6 crore offline merchants across India. PhonePe operates in the realm of digital payments, serving a wide-ranging audience spanning over 11 languages.
It was among the first payment apps built on the Unified Payments Interface (UPI) that surpassed a billion transactions.
You may also like: Cracking the quick commerce code: Zepto’s journey to a $1.4 billion unicorn
PhonePe offers a wide array of services, from money transfers to gold purchases, making it an integral part of everyday financial transactions. Beyond digital payments, they’ve ventured into mutual funds, insurance, merchant lending and are gearing up for consumer lending offerings and their very own app store.
As a move to elevate their brand position, they have even added a touch of Bollywood glam to its SmartSpeakers (speakers that announce the recipt of payments in retail stores)by authenticating customer payments with the iconic voice of Amitabh Bachchan.
Dominating the digital payments arena
In India’s dynamic digital payments market, the total transaction value is set to soar to $180.40 billion in 2023. The projected annual growth rate stands at an impressive 15.56% (CAGR 2023–2027), with an expected total of $321.70 billion by 2027.
Market share of UPI apps by transaction value (March 2023)
*Source: NPCI data
PhonePe, alongside Google Pay and Paytm, stands tall as one of the dominant playe₹, commanding a whopping 96% of all UPI transactions by value in March.
A snapshot of Phonepe’s revenue growth
In the fiscal year of 2022, PhonePe saw its revenue skyrocket by 2.4 times, soaring from ₹ 690 crore in FY21 to a whopping ₹ 1,646 crore in FY22. This surge was primarily fueled by payment transactions, which constituted a whopping 99% of the operating income, tallying up to ₹ 1,630 crore in FY22.
|Particulars||FY21 (INR crore)||FY22 (INR crore)|
|Cash from operations||-1,237||-1,126|
Despite a surge in expenditures, the company showcased financial prudence by keeping the losses in check, which stood at ₹ 2,014 crore, marking a 16.5% increase from the previous year.
In the first nine months of 2022, PhonePe raked in ₹ 1,913 crore in revenue, processed a staggering 2,721.1 crore transactions, and recorded a payment value of ₹ 45.3 trillion.
EBIT for this period improved to ₹ -410.4 crore, a significant improvement from the ₹ -2,061.4 crore loss in FY22.
As the company scales, so do its expenses. Marketing expenses, a significant chunk of PhonePe’s costs, surged by approximately 62% to ₹866 crore during the year.
The increase was primarily driven by marketing campaigns related to its new insurance distribution business during the ICC Cricket World Cup in 2021 and the IPL in 2022.
Employee costs also saw a substantial rise, climbing by 41% to ₹555 crore in FY 2022. Meanwhile, other operating expenses during the year shot up by 57% to ₹697 crore.
Funding and Backers
PhonePe’s financial prowess is not only reflected in its numbers but also in its ability to attract funding. To date, the company has secured over $2.6 billion in funding across 18 rounds as of May 2023.
In fact, its ongoing financing round has propelled PhonePe’s valuation to a staggering $12 billion, with investments pouring in from notable backers, including General Atlantic.
Here’s a detailed breakdown of PhonePe’s funding and its esteemed investors:
|Date||Amount Raised||Round||Lead Investors|
|May 22, 2023||$100 million||Private Equity||General Atlantic|
|April 12, 2023||$100 million||Private Equity||General Atlantic|
|March 17, 2023||$200 million||Corporate||Walmart|
|February 14, 2023||$100 million||Private Equity||–|
|January 19, 2023||$350 million||Private Equity||General Atlantic|
|August 18, 2021||$350 million||Corporate||Walmart|
|December 14, 2020||$21 million||Corporate||Flipkart|
|December 3, 2020||$700 million||Corporate||Walmart|
|April 27, 2020||$28 million||Corporate||Flipkart|
|February 26, 2020||$59.6 million||Corporate||Flipkart|
|December 10, 2019||$78.8 million||Corporate||Flipkart|
|October 22, 2019||$54.7 million||Corporate||Flipkart|
|July 30, 2019||$93.5 million||Corporate||Flipkart|
|March 22, 2019||$101 million||Corporate||Flipkart|
|August 9, 2018||$60 million||Corporate||Flipkart|
|April 1, 2018||$42.7 million||Corporate||Flipkart|
|March 23, 2018||$69.4 million||Corporate||Flipkart|
|October 4, 2017||$33.4 million||Corporate||Flipkart|
Share(dot)Market: A new frontier
Now, let’s talk about Share(dot)Market. It brings a range of investment products to the table, including stocks (intraday and delivery), mutual funds, and exchange-traded funds (ETFs). But there’s more – the platform offers market intelligence content and quantitative research-driven offerings like WealthBaskets.
WealthBaskets are curated collections of stocks and investment products aligned with specific themes or sectors, similar to Smallcase by (Zerodha). They empower users to build active equity portfolios effortlessly.
The platform is set to roll out additional features like personalised WealthBaskets, portfolio analytics optimiser, and quant analytics for stocks and mutual funds.
These curated collections of stocks and investment products, backed by SEBI-registered intermediaries. They empower you to build an active equity portfolio with ease and cost-effectiveness.
The brains behind Share(dot)Market – Ujjwal Jain and Sujit Modi, who brought you WealthDesk and OpenQ. PhonePe acquired their wealth management companies in May 2022, and now they’re redefining discount broking.
But why did a UPI platform suddenly venture into the stock market business?
Share(dot)Market is PhonePe’s strategy to entice hesitant retail investors and re-engage users who possess Demat accounts but aren’t actively trading. According to NSE data, the count of active investors was approximately 35 million in July 2023.
India boasted over 123 million Demat accounts during the same period, with a remarkable 3 million new accounts created that month alone. This surge in Demat accounts, a record noted by both CDSL and NSDL depositories, underscores PhonePe’s optimism.
It also highlights the emergence of a new contender, Jio Financial Services, in this thriving landscape.
Stockbroking is just one component of the investment technology stack. The real revenue potential lies in acquiring an asset management company (AMC) license, a privilege held by Jio through its partnership with BlackRock.
In August 2021, PhonePe obtained board approval to establish its own AMC or mutual fund business and promptly sought SEBI’s approval. However, the regulator has yet to greenlight PhonePe’s MF (mutual fund) license application.
AMCs typically levy management fees based on the percentage of assets under management, while brokerages often charge per trade or offer flat-fee accounts. To fully tap into the substantial revenue opportunities in this domain, PhonePe must secure the coveted AMC license.
How is Stock(dot)Market different from other broking platforms?
PhonePe’s Share(dot)Market aims to revolutionise discount broking, offering a holistic experience that combines intelligence, execution, and convenience.
With its quant research solutions, PhonePe aims to turn retail investors into expert market players. To attract more users, PhonePe has announced a series of waivers for early birds. For a one-time onboarding fee of ₹ 199, you’ll enjoy perks like:
- Zero brokerage on trades up to ₹ 400.
- Zero platform fee for both in-house and third-party WealthBaskets.
- Zero brokerage on WealthBasket transactions across the board.
These benefits are up until March 31, 2024.
Here’s a comparison of prices between Zerodha, Groww and Share(dot)market:
|Platform||Trading Account Opening (₹)||Demat Account Opening (₹)||Equity Delivery Brokerage||Brokerage for Other Segments|
|₹199 (incl GST)||₹0||₹20 or 0.05% (subject to first ₹400 brokerage waived off until 31/08/2024)||₹20 or 0.05%|
(whichever is lower)
|Groww||₹0||₹0||₹20 or 0.05%||₹20 or 0.05% (whichever is lower)|
|Zerodha||₹0||₹200||₹0 (free equity delivery)||₹20 or 0.03% (whichever is lower) for intraday, futures, options, currency, and commodity segments|
What is in the horizon for PhonePe
According to its management’s discussions with audit firm KPMG, PhonePe expects to achieve an EBITDA profit of ₹ 1,797 crore in the calendar year 2025, with an EBITDA margin of 19.7%. Additionally, the company anticipates revenue to reach ₹ 9,139 crore in 2025.
PhonePe has big plans for the future, with its sights firmly set on an IPO in the 2024–2025 timeframe. The company intends to harness the power of its robust user base, cutting-edge technologies, and strategic alliances to fuel growth and extend its footprint in the market.
The IPO will be pivotal in its journey towards continued innovation and expansion.
So, do you use PhonePe? If you do, are you planning to give their new trading app a try? Share your thoughts with us in the comments!
A curious mind, a love for writing, and a passion for all things finance – that’s me in a nutshell. Whether I’m exploring the latest stock market trends or diving into the nitty-gritty of personal finance, marketing, and AI. I’m always on the hunt for the next big story.