Digital payments giant PhonePe is making its big e-commerce foray with the hyperlocal commerce app – Pincode – by going live on ONDC. Bangalore will be the first city to go live with grocery and food; other cities and categories will be added soon.
In an exclusive interview with CNBC-TV18, Sameer Nigam, CEO and Founder PhonePe said, “We are launching the app in Banglore in 150 pin codes.” He added, “After the top three metros, the goal is to launch it in 10-15 cities by year-end.”
With 450 million users, PhonePe claims to have one out of four Indians on its platform. Over 35 million merchants accept payments via PhonePe and most of them do their business in tier-2 cities and beyond. Nigam said, “We have crossed over 150 million transactions a day. It is important for us, to keep investing in infrastructure.”
To grow its hyperlocal commerce app, the company has a huge investment plan, Nigam added. “UPI-level investments (In Pincode) can be expected by PhonePe – as the market opportunity is large.”
At present, the company is in the middle of a $1 billion fundraise. The company even raised an additional $200 million in primary capital from Walmart, at a pre-money valuation of $12 billion last month. The company had earlier stated that part of the fund would be utilised to grow its ONDC-based shopping and account aggregators.
With an entry into local commerce, the company is making a foray into India's e-retail market which is pegged to triple from $50 billion in 2022 to $150 billion by 2027, as per a Bain report. In addition, the shopper base is likely to reach 400-450 million by 2027. This growth will be led by new online shoppers - primarily from tier 2 and 3 cities. For PhonePe, which dominates UPI with around 50 percent market share, the foray into local commerce will bring the next wave of growth.
The company will also be launching their seller platform in the next few months, to get its vast merchant base onto the ONDC network.
With Pincode, the company plans to enable not just local retailers, MSMEs, and farmers but the entire local ecosystem. The company aspires to take this offering to its over 3.5 crore merchants.
PhonePe is quite clear that with Pincode app, it is not competing with the likes of Flipkart or Amazon. “With ONDC, we are not facilitating pan-India transactions. We do not believe a federated model will work with that. Flipkart solves a very different problem extremely well. They have the most sophisticated supply chain in the country. But local market dynamics are different. I don’t think any player has cracked the hyperlocal market in a meaningful way.”
Nigam added, “We are trying to create a hyperlocal quick commerce alternative that is inclusive.”
Nigam strongly believes by going live on ONDC, Pincode will be positive in terms of contribution margin from day one. He added, “ONDC wouldn’t be a drag on our margins.”
Meanwhile, the company’s core business grew in triple digits for the fourth straight year and that growth trajectory is expected to continue this year too, Nigam said while commenting on its overall business. He added, “We will be profitable (in our core business) in 2023.”
Commenting on the cash burn, he said the company’s expense was largely due to ESOPs. As per MCA filings, the company’s expenses stood at Rs 3,706 crore and its revenue from operations surged 2.4x to Rs 1,646 crore.
The company reported a contribution of Rs 13 crore from new segments like mutual funds and insurance.
After new businesses settle down, the company will explore an IPO. “We will look at an IPO in 2025,” Nigam said. He added with the domicile shift, the first step towards getting listed in India has been taken. However, he is clear that the company will only hit the IPO market after the market situation improves.
He added, “With money in the bank, we are well placed to fund our aspirations.”
Exclusive | PhonePe’s Pincode goes live on ONDC — starts with Bangalore - CNBCTV18
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