When was the last time you saw a private company release a revealing annual report? But PhonePe is no longer an ordinary business.

What was once just a UPI app has now transformed into a tech giant, present in key areas outside of payments. This is why the information contained in the annual report seems unusual.

Especially in the context where startups cherry-pick numbers from their financial data and share them selectively or without full clarity. So it was a breath of fresh air to see PhonePe being opened up, dare we say as a public company.

In fact, co-founder and CEO Sameer Nigam also admitted in the annual report that PhonePe aligns its corporate governance with that of a publicly traded company.

With over INR 5,000 in revenue in FY24, PhonePe became the second startup in India to achieve this milestone after Paytm.

Over the past eight years, it has built an empire around UPI payments, but in recent years it has expanded its product portfolio by leveraging its massive existing user base of 500 million users to sell d other financial services to diversity and increase its turnover.

• PhonePe insurance: Launched in early 2020, PhonePe acted as an insurance aggregator to sell insurance from various insurance companies. It received the IRDAI license for distribution in 2021.
• PhonePe Loan: PhonePe had initially ventured into the merchant lending business in mid-2023. However, expanding its horizon further, the startup in May this year also ventured into consumer lending to increase its revenue figure. business.
• Stock brokerage platform: Last year, with the launch of Share.Market, PhonePe threw its hat into the Zerodha and Groww space.
• Indus App Store: The startup challenging Google’s App Store monopoly, has launched an indigenous app store for Android devices.
• PIN code: Building on the growing ONDC network, PhonePe launched its e-commerce platform connecting customers with retail stores.

While the addition of newer products will help PhonePe scale further, even offsetting the impact of a potential 30% UPI market share expected to be implemented by the end of the year, it’s important to know who’s at the helm worth $12 billion. to start up.

However, unlike many other companies in the super app industry, PhonePe has taken a startup-within-a-startup approach to its various products. As a result, the company’s management structure includes a horizontal layer as well as vertical function heads.

As it has added lines of business, the company has added business leaders who lead that vertical with centralized functions for administration, finance, human resources and other aspects of managing a startup.

This is how PhonePe is structured:

PhonePe Horizontal Core

The Walmart-backed startup has a centralized horizontal team of 12 members – including the three co-founders – that oversees the overall functioning of the entire PhonePe group, comprising six subsidiaries.

Explaining how the core management team works, a PhonePe spokesperson told Inc42: “The horizontal functions (central management team) work in a matrix manner so that each company has the direction and expertise necessary for these functions while simultaneously achieving the horizontal benefits of governance. , inter-company apprenticeships, career development, etc.

This means that the core team, in addition to keeping things under control at the group level, also ensures that each vertical product manager focuses on product development without worrying about other responsibilities, including hiring , finance, legal aspects and marketing, among others.

These additional responsibilities highlight the importance of horizontal leadership. The institutional knowledge that achieves effectiveness at scale rests in these key centralized leadership positions.

“Trust and stability at the top have brought multiple benefits to PhonePe, as the company has grown and spawned new businesses,” the annual report highlights.

People in the horizontal management layer have an average tenure of 6.7 years (excluding the founders, of course), indicating that the top executives stayed together throughout PhonePe’s acquisition by Flipkart, the subsequent separation and move from the US to India.

PhonePe’s growing product team

Now let’s come to those who lead the individual products highlighted earlier in the story.

It’s no surprise that PhonePe handles the main revenue generators: consumer payments, merchant payments, invoicing, and international payments. But the main application is also responsible for distributing digital insurance and loans.

Using its extensive UPI distribution network, the startup launched and expanded its distribution businesses around insurance, mutual funds and EDI loans for merchants.

This cross-selling and upselling of products helped the startup not only add revenue streams, but also diversify, protecting it against external changes, ensuring steady and sustainable year-on-year revenue growth. the other.

A person close to the company claimed that each new vertical is run as a full-fledged startup, although some of them are housed within the PhonePe app.

PhonePe has hired different product managers for each of them, like Vivek Lohcheb for Pincode or Ritesh Pai, who heads the international business.

Besides hiring, the startup also elevated some key employees from its existing management team to take on new lines of business.

These include Priya Narasimhan, who previously headed revenue at PhonePe Group but is now CBO of the Indus Appstore. Similarly, Hemant Gala, who was responsible for payments and banking financial services, now heads the digital lending business.

Ujjwal Jain, the founder of WealthBasket – a startup acquired by PhonePe in 2022 – has been elevated to the helm of Share.Market, one of PhonePe’s main sources of revenue in the coming year.

All these vertical managers report directly to Nigam, who, along with CTO Chari, forms the bridge between the horizontal and vertical layers. Despite a comprehensive C-suite team, work was reduced for each individual, avoiding any overlap with others.

One step ahead

Now let’s return to PhonePe’s transparency with the annual report, in which it claimed to operate as a publicly traded company. It also reveals more about the company’s position.

The focus on different verticals shows that PhonePe is aware of the difficult situation it finds itself in. In fact, this difficult situation is also a reason why the company didn’t really pull the trigger on an IPO.

We’re of course talking about PhonePe’s reliance on UPI, and it’s becoming increasingly clear that the company needs to diversify and not put all its eggs in one basket.

It is essential to leverage its vast UPI distribution, where it is the market leader. This is why the emphasis is on recruiting leaders for each business sector, which will need to be developed just as much as the UPI payments sector.

Horizontal leadership plays a key role in connecting these verticals, since the whole purpose of a super app is to cross-sell.

But there are major challenges: The first is that each vertical must attract and acquire customers independently, rather than relying on PhonePe itself. For example, Share.Market can use PhonePe as a funnel, but it cannot do so while ignoring new user acquisition. The same goes for the Pin code.

Additionally, running an app store is not without operational challenges, particularly around security, user safety, and developer engagement, which involve a high degree of difficulty.

PhonePe needs to ensure seamless vertical integration to deliver a true super app experience – something that even the Tata Group, through its Tata Neu, has failed to deliver, despite its deep pockets.

We also see the logic of having several different products for each of these verticals, unlike Paytm for example. There is still debate that the super apps model is not ideally suited to public procurement.

Paytm’s Vijay Shekhar Sharma has spoken about this challenge in the past, so PhonePe is playing it smart by positioning itself as a multi-product company, rather than a super app in the traditional sense.

The jury is still out on which approach is the right one. PhonePe hopes its super app bet will work better with retail investors than Paytm’s when the IPO happens.

(Editing by Nikhil Subramaniam)