Flipkart Hives Off PhonePe, Digital Payments Company To Be Valued At US$5.5 Billion


PhonePe has in the process raised primary capital of US$700 million in a round led by Walmart.

After almost a year of it being under discussions, Flipkart has spun off PhonePe as a separate entity, with the e-commerce major partially divesting its stake in the digital payments firm to its parent Walmart.

PhonePe has in the process raised primary capital of US$700 million in a round led by Walmart, with the new ownership structure set to grant the fast-growing digital payments giant more autonomy in operations.

Walmart is also Flipkart’s largest shareholder.

India’s telecom sector, in the efforts of enabling policies including more quantum of the spectrum, is set to establish new benchmarks in the next-generation network deployments and service delivery.

The fundraising round ascribes a value of US$5.5 billion to the four-year old digital payment startup’s business, bringing down Flipkart’s stake. However, Flipkart remains the majority shareholder with more than 80 per cent stake in PhonePe.

The “partial” hive off will now provide PhonePe the power to constitute a new board of directors, and to create equity incentives for its employees. The move has also granted the fast-growing digital payments company to access long term capital avenues.

On March 27, 2019, ET had first reported that PhonePe received an in-principle approval from Flipkart’s board to be hived off as a separate entity.

Confirming the development, PhonePe CEO Sameer Nigam said, “the partial spin-off gives PhonePe access to dedicated long-term capital to pursue our vision of providing financial inclusion to a billion Indians,” in a statement to ET.

Meanwhile Flipkart CEO Kalyan Krishnamurthy said that the move will help “maximize” PhonePe’s potential as it moves to the next phase of its development, “and it will also maximize value creation for Flipkart and our shareholders.”

PhonePe currently has over 250 million registered users, making it one of the most used digital payments companies in India amid an increasingly competitive landscape where Google, Softbank and Alibaba backed Paytm, Amazon and Facebook are all vying for dominance.

Having processed over 800 million transactions, the company was the most used platform on India’s real-time digital payments rail Unified Payments Interface in October 2020 ahead of its closest rival Google Pay.

PhonePe also has a digital wallet business, and is also looking to crack India’s insurance and retail investment intermediary businesses as well in its next leg of growth.

“Flipkart’s Board determined that this was the right time to partially spin-off PhonePe so it can access dedicated capital to fund its long-term ambitions over the next three to four years,” the companies further said in the joint statement.

PhonePe, which was founded by ex-Flipkart executives Nigam, Rahul Chari and Burzin Engineer, was acquired by Flipkart in 2016. After two years, in May 2018, Flipkart was acquired by the US retail giant Walmart which led to PhonePe becoming a part of the Walmart stable. PhonePe has since then been a core part of Walmart’s Flipkart purchase.

PhonePe’s spinning off also comes at a time when the digital payments ecosystem in the country is getting more competitive. Flipkart is also building financial services products in-house like buy now pay later which can actually help increase affordability for consumers.

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