[Watch] CEO Sameer Nigam on PhonePe's plans to dive deeper into India, way forward with Walmart

PhonePe CEO and Co-founder Sameer Nigam talks about the fintech company’s ambition to enter different markets, and also about plans to broaden its financial services play and impact on India’s kirana store network.

2nd Dec 2019
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Many of you tracking the Indian startup ecosystem will agree with me that Sameer Nigam is probably one of the finest entrepreneurs in our country today, with a deep product thinking mindset.

I have seen him at work from his Flipkart days, and now at PhonePe. He is always upping his own game and chasing impact in the true sense of the word.

Thus, it comes as no surprise that the co-founder and chief executive of digital payments firm PhonePe has continually set his sights on bold and ambitious targets – the kind that has bolstered the fintech company’s position to the top of India’s cashless revolution.


PhonePe, Sameer Nigam

YourStory Founder & CEO Shradha Sharma (right) in conversation with Sameer Nigam (left).

In an open and honest conversation with Sameer, I found that he is more confident than ever today about PhonePe’s ability to seize the many opportunities not only in various continents, but diving deeper into the Indian market.

He tells me, “We always thought of using technology and data to transform economies, and there was nothing bigger than financial services: easy loans, insurance, and digital payments. The data footprint that you actually get with payments can be used both to improve the merchants’ lives and consumers’ lives as well as really push financial services.”

I am confident that it is only a matter of time before PhonePe achieves its three main targets: First, foray into foreign shores, buoyed by Walmart’s scale and presence in different markets; second, make ‘substantial progress’ in improving the business prospects of India’s ubiquitous kirana stores; and third, expand its presence in the financial services space.


Watch the full interview here


PhonePe’s real value

Sameer is known for his ability to build teams, a fact he himself acknowledges as his strength. He will most likely rely on this very ‘super strength’ of his to steer the over 10,000-member-strong PhonePe team to work together towards achieving this common purpose over the next year.


PhonePe has been recognised as the surprise, hidden gem among Flipkart’s group of companies, which Walmart acquired as part of its $16-billion-acquisition of ecommerce firm Flipkart in May 2018.


In fact, at Walmart Inc’s annual shareholders’ meeting at the global retail giant’s headquarters in Bentonville, Arkansas, in June this year, I heard PhonePe’s name taken frequently each time the top executives took the stage.


More recently, during Walmart’s third-quarter earnings report, its CEO Doug McMillan again dedicated a whole section of the statement to Flipkart and PhonePe, lauding their contribution to the US-based retailer’s quarterly earnings and expressing confidence at the opportunities they present.





More specifically about PhonePe, he had said, “We also continue to see tremendous growth with PhonePe. The company is acquiring more than three million new customers per month. With over 55 million monthly active users, we’re quickly looking for ways to monetise the customer base, including an offering of financial services.


In September, analysts at Morgan Stanley had made a bullish estimate stating that PhonePe’s valuation could rise as high as $20 billion (it is pegged at $7 billion at present) if it continues to maintain the current growth momentum and is able to monetise its new financial services business.


“I think fintech is scorching hot. I have said this in various forums that we see ourselves more as a fintech player. For whatever it is worth, financial services is a part of the play. But yes, fintech is hot. I think there is a lot of interest in the market because it’s so underserved. Insurance is at three percent and mutual funds are barely scratching the surface. So, I think there’s lots of demand,” Sameer elaborates.


As part of its focus on monetising its current user base, PhonePe, in September, launched PhonePe Switch, a one-click entry point to a world of apps on its platform, allowing its customers to seamlessly switch between PhonePe and their favourite shopping, food, travel, and grocery apps from within PhonePe itself.


And that is the real impact for Sameer - the ability to make life simpler for his customers. “I like seeing my maid not have to stand in line to pay electricity bill because she can do it on something I am building. I like seeing the local cake shop saying that ‘hey I got 50 new customers because of PhonePe. I mean those little things when they add up at scale can change things.”


That is the measure of success for him, he tells me. “Feeling a sense of gratification based on the impact on others lives. I think we have had enough positive impact on lives.”

Broadening financial services play

Earlier this year, PhonePe took its battle with chief rival Paytm to the financial services and wealth management space when it launched its own financial services products for consumers on its app. In April, the company introduced the first of several mutual fund categories as part of its tax-saving product offerings, which also includes Digital Gold that it launched in December 2017.


Going forward, the company will soon launch liquid funds along with more categories in mutual funds, going from equity to debt and finally to a full mutual funds’ portfolio, Sameer tells me.


PhonePe, Sameer Nigam

But that’s not all. PhonePe plans to also foray into insurance and, more importantly, shore up its data capabilities in order to broaden its financial services play.


“As I had said in January 2019, we are giving lending a pass this year. We felt that there is too much regulatory flux in the environment and hence, not very conducive for us to enter lending. We wanted to understand from the mistakes of others and tread cautiously. Plus, we are shoring up our data capabilities and building our refineries,” Sameer says.




The valuation game

In September, Morgan Stanley analysts pegged PhonePe’s current valuation at $7 billion, based on the company’s market share and the state of the digital payments industry. The current estimated valuation is a significant increase from the $1.5 billion valuation ascribed to it at the time of Walmart’s acquisition of its parent company Flipkart.


When quizzed about the $7 billion valuation estimated by Morgan Stanley, Sameer jokingly replies, “Yeah, too low.”


Quickly changing tone, he responded more seriously, “I am flattered by the Morgan Stanley report you mentioned. I think we are blessed in that the Flipkart board has some very deep-pocketed investors already. Plus, there’s Walmart which helps add to our fortune.”


Indeed, Walmart has already infused cash of around $280 million in PhonePe in two tranches after it acquired Flipkart, till now. Speaking about further fund raises and infusions at PhonePe – which recorded a five-fold increase in its annual FY19 revenue to Rs. 245.8 crore from Rs. 49 crore in FY18 – Sameer says,


“When we need money, we get it if we make a good case to our board. But I don’t think we are actively seeking money. We have said this before: if the right kind of partners present themselves and we see merit in bringing on some strategic partners, we will do so”.


In June this year, KeyBanc Capital Markets analyst Edward Yruma said PhonePe could be worth as much as $14 billion in the medium term if India’s digital payment space grows at a compound annual growth rate of over 20 percent to $135 billion through 2023. That’s close to what Walmart paid for the entire 77 percent majority stake in Flipkart in 2018.

Powering India’s kirana stores

In February 2019, months after it acquired Flipkart, Walmart started offering PhonePe as a payment option to consumers at its cash-and-carry retail stores in India. For PhonePe, it was an opportunity to widen its presence in the offline retail space – full of mom-and-pop stores or the very kirana stores that Sameer Nigam’s team is dead set on servicing in a way that ensures the company can meaningfully improve their business prospects.


“I am hoping if you meet a year from now, we would have started making substantial progress in improving the business prospects of the kiranas. That’s one very precious thing for us because I think that opportunity is here and now. These kiranas all have massive local ecosystems but are not connected digitally. That’s an area of key focus.”


PhonePe, Sameer Nigam

And yet, what sets PhonePe apart from rivals is its deep understanding of the grassroot level and its commitment to putting over 10,000 people on the ground to service the thus-far-unorganised retail market, Sameer says.


“The ability to be able to put thousands of people on the ground and deal with millions of kirana shops – their motivations and their aspirations. You can’t do it with just API and code. In India, you have to invest in people on the ground, train them. And I think that’s something that’s setting us apart. We are actively investing in the heartland.”


Clearly, this investment is paying off, with the Tier 2 and Tier 3 cities and towns accounting for at least 70 percent of all PhonePe’s transactions and customers.


“In fact, the majority is now tier three and that is a testament to the fact that digital payments is penetrating very very rapidly in India,” Sameer adds.

Of new industries and ventures

Admittedly, Sameer enjoys venturing into unchartered territories that involve learning first-hand the nuts and bolts of these industries. One has only to look at Sameer’s past to realise that he has ensured this throughout his career – from his first venture which was a music company to ecommerce at Flipkart and now as a highly regulated financial services venture.


PhonePe, Sameer Nigam


“I just love being able to enter different industries. So that’s one thing that keeps me going. At PhonePe because our canvas is that broad, every month we are discussing new stuff – sometimes insurance, sometimes the Switch platform, sometimes our offline kirana networks in Tier III cities/towns. So, these sort of new ideas keep the imagination fluid,” a visibly excited Sameer tells me.


And channelising these myriad imaginations and innovations, Sameer says, is a close-knit team who works with a single-minded focus on ensuring PhonePe realises its ambitious plans to expand and grow in new and different markets and industries.


He adds, “I think this particular stint has been very gratifying. We actually have a really good set of people who have known each other for a very long time. So, the trust factor is very high and there’s almost zero politicking. For the most part, we move with a single-minded purpose and that just makes work fun.”


(Edited by Dipti Nair)




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