Flipkart Funds Paytm Rival In India

Flipkart, the India eCommerce player, has reportedly invested ₹452 crore ($66 million USD) into PhonePe, its payments unit.

According to a report in DealStreetAsia, the investment comes as PhonePe is in expansion mode, and as it tries to take on Paytm, the digital payments company in India that has backing from SoftBank. Citing regulatory documents, PhonePe got the funds from Flipkart in July. Last October, Flipkart said it planned to invest $500 million to expand the payments unit, in addition to the $75 million it invested in the unit since acquiring PhonePe in April of 2016, noted the report.

The acquisition of PhonePe is far from the first time Flipkart has attempted to establish itself as a legitimate player in India’s payments ecosystem, but the purchase of the company may represent its best chance yet. Just last year, Flipkart was forced to buy out FX Mart, a payments provider that had secured government approval to operate until at least 2019. That backdoor access cost Flipkart just over $7 million — not a game-changing deal, but enough money to be missed in the thin-margin game of eCommerce in emerging markets.

At the same time as Flipkart’s investment in PhonePe, it is also expanding its core eCommerce business. The company, being acquired by Walmart, will roll out a second loyalty program later in August. Reuters reported the second loyalty program — which will be called Flipkart Plus — will roll out on Aug. 15, India’s Independence Day. The goal is to increase customer retention, and to take on Amazon and its Prime subscription service. Under the program, customers will get free fast delivery and early access to sales events. Customers will also get an increased level of customer support, noted Reuters.

In May, Walmart announced a deal to acquire a 77 percent stake in Flipkart for $16 billion. In a press release at the time, Walmart said that once the deal is completed, the retailer will own 77 percent of Flipkart. The remainder of the business will be held by existing shareholders, including Flipkart Co-founder Binny Bansal, Tencent Holdings, Tiger Global Management and Microsoft.