Walmart-owned PhonePe has invested over Rs 800 crore in its subsidiaries during the last year to grow businesses ranging from insurance broking to wealth management and hyperlocal ecommerce, regulatory filings show. More than half of this, or Rs 426 crore, went to PhonePe Insurance Broking Services — a clear indication of the payment firm’s intention to build a large retail cover distribution business.
PhonePe has infused more than Rs 1,000 crore as equity investment in its insurance unit since it was licensed, according to information sourced from the Registrar of Companies.
“Looking at the large investment figure, it is quite clear that PhonePe is extremely bullish on insurance, but the products it’s selling are not very highly remunerative,” said a senior industry executive aware of the details.
In the past year, the digital payments firm also invested Rs 287 crore in subsidiary PhonePe Wealth Broking.
This operates the stock-broking app Share.Market.
It ploughed in Rs 90 crore in two tranches — first in July 2023 and again earlier this month — into Pincode Shopping Solutions. This unit manages the ecommerce app Pincode, built on top of government-backed Open Network for Digital Commerce (ONDC).
Insurance has long been a strategic bet for PhonePe, while others such as closest rival Paytm were chasing growth primarily via consumer credit.
However, industry executives said that even though PhonePe Insurance is seeing an uptick in sales volume from its portfolio of micro-insurance products and two-wheeler covers, this “does not contribute much to revenues, since the commission for each product is very small. It (PhonePe Insurance) needs to sell more life and health products to build strong revenue lines.”
PhonePe did not respond to ET’s queries on the matter.
Since September 2021, PhonePe has sold almost one crore insurance policies, of which 40 lakh were sold in 2023 alone. According to data shared by the company, it processed premiums worth Rs 186 crore in October-December 2023, with an average ticket size of Rs 1,601. Almost 11.6 lakh policies were sold in those three months.
According to regulatory filings sourced from Tofler, PhonePe Insurance Broking reported operating revenue of Rs 28 crore for the fiscal year ended March 2023, with a net loss of Rs 427 crore. The company’s biggest expenditure was towards advertising and promotionals, for which it spent Rs 317 crore.
New Businesses
In 2023, PhonePe raised around $650 million from a clutch of marquee investors, including Walmart, Tiger Global, Ribbit Capital and General Atlantic. A major part of this was meant to power its new ventures.
In November last year, PhonePe elevated multiple business heads as chief executives of their verticals. Vishal Gupta was picked to lead the insurance business, Vivek Lohcheb for ecommerce app Pincode, Hemant Gala for the lending business, while Ujjwal Jain became CEO of Share.Market.
Share.Market, which competes with the likes of Tiger Global-backed Groww, Zerodha, Paytm Money and Angel One, was launched in August 2023, but PhonePe had forayed into mutual funds distribution back in 2019.
The payments startup has plans for its core business too. As reported by ET earlier, even though PhonePe has built a large base of over 500 million registered users availing unified payments interface (UPI) service, it is aiming to also establish and monetise a base of merchants via Pincode.
The hyperlocal ecommerce platform built on ONDC was launched a year ago and enables online commerce between local offline stores and customers in the neighbourhood.
As part of this strategy, PhonePe earlier made an offer to invest a significant sum in cash-strapped Dunzo’s merchant network business, albeit unsuccessfully. ET exclusively reported this development in December 2023.
PhonePe, which moved its domicile from Singapore to India back in October 2022, reported a 77% increase in its operating revenue to Rs 2,914 crore for FY23. Its loss, excluding expenses on account of employee stock options, stood at Rs 744 crore for the year.
