Walmart's PhonePe investing $200 mn to set up data centres in India

Walmart-owned fintech firm PhonePe is investing about $200 million to set up data centres in India, its Co-founder and Chief Technology Officer Rahul Chari said on Thursday.

The Bengaluru-based firm is setting up data centres in India at a time when it has completed three steps to move its domicile to India. The company has over the past year moved all its businesses, including insurance and wealth broking, and subsidiaries of PhonePe Singapore to PhonePe Pvt Ltd-India.

On Thursday, the firm, along with NTT and Dell Technologies, launched the country’s first data centre with a smart cooling technology in Mumbai. This takes PhonePe’s total data centres to three. The company plans to set up the fourth such facility in Bengaluru soon.

“We do believe that captive data centres and on-premise technologies are the way we should go to meet regulations like data localisation,” said Chari.

The company claimed the new centre would help it build sustainable infrastructure to seamlessly scale up its operations across the country. This is critical as PhonePe supports 400 million users on its platform doing about 3.6 billion transactions per month. These are related to credit and debits across various banks. This means over 120 million transactions per day or 7,000 transactions per second. Chari said PhonePe’s goal was to be prepared for 500 million daily transactions by the end of next year.

“What that really means is that when we drive these transactions, our data centres heat up fast,” said Chari. “We have to (tightly pack) servers, like sardines in a can and when we do that, they break due to heat. We are constantly looking for ways in which we can get more efficient to meet the rapid scale that digital transactions are going through in India.”

PhonePe competes with players, such as Google Pay, Paytm, and Amazon Pay in its bid to dominate India’s fintech sector. Currently accounting for about 7 per cent of India’s $1.4-trillion financial services enterprise value, the sector is expected to touch $350 billion in enterprise value by 2026, according to a Bain and Company report.

The company, founded by former Flipkart executives Sameer Nigam, Rahul Chari, and Burzin Engineer in 2015, was bought by Flipkart in 2016. Two years later, it became part of Walmart after the US retail giant acquired Flipkart for $16 billion. PhonePe had in 2019 received in-principle approval from Flipkart’s board to be hived off as a separate entity.

When asked about the role domiciling to India would play, in the company’s IPO ambitions, Chari said the founders had always been vocal about the fact that PhonePe was an Indian company and worked in a regulated space.

“We have always been completely localised when it comes to our infrastructure,” said Chari. “We will go for an IPO if and when we are ready for it and need it. We domiciled because we are an Indian company and are serving this market.”

The new 4.8-megawatt facility, which occupies 13,740 square feet at Mahape, Navi Mumbai, is built and designed with advanced alternative cooling technologies like direct contact liquid Cooling and liquid immersion cooling. The data centre’s Dell PowerEdge servers will provide simplified management, and intelligent automation while using less energy.

“This is the first commercial liquid-immersed data centre in India, equal to the size of about five tennis courts lined up,” said Manish Gupta, vice president and general manager, infrastructure solutions group, Dell Technologies India. “Here we are saving about 1.5 megawatts that can power about 1,900 homes.”