Flipkart’s PhonePe Valued At $5.5 Billion As It Becomes A Separate Entity
PhonePe is raising $700 million in primary capital from Walmart and a clutch of existing investors.
Walmart Inc.-owned Flipkart will spin off PhonePe into a separate unit and infuse capital, valuing the digital payments business at $5.5 billion.
PhonePe, following the spin-off, is raising $700 million in primary capital, in a round led by Walmart with the participation of some existing investors, it said in a statement. The platform commands a third of the transaction volumes via the Unified Payments Interface.sd
"This partial spin-off gives PhonePe access to dedicated long-term capital to pursue our vision of providing financial inclusion to a billion Indians,” Sameer Nigam, founder and chief executive officer at PhonePe, said in the statement.
The spin-off, in the works for more than a year, will reduce Flipkart’s ownership in PhonePe from 100% to about 87%, a person familiar with the matter told BloombergQuint on the condition of anonymity. The person said that Walmart is expected to hold around 10% in PhonePe, while the remaining 3% will go to other existing investors.
PhonePe said in the statement that the structure will provide it an opportunity to constitute a new board of directors focused on supporting its development. It will also allow it to create a equity incentive, or ESOP programme, for its employees.
Flipkart Co-founder Binny Bansal will join the board of PhonePe, the company said. He will join PhonePe Co-founders Sameer Nigam and Rahul Chari.
Rohit Bhagat, Flipkart’s independent director, will also be on PhonePe’s board. Two other independent directors from Walmart will also join the digital payments company, a company spokeswoman told BloombergQuint.
Bansal had abruptly resigned from Flipkart following an internal investigation into an allegation of “serious personal misconduct" in November 2018. After that, he co-founded startup consultancy xto10x Technologies.
PhonePe’s spin-off comes at a time when the digital payments landscape in India has turned extremely competitive, with Google Pay, SoftBank- and Alibaba-backed Paytm, Amazon Pay and WhatsApp Pay vying for a share of transactions.
PhonePe, with over 250 million users, is among the leader in the real-time UPI payments segment. According to data available for the month of October, Google Pay and Walmart-owned PhonePe had cornered 80% of the UPI market, split evenly between themselves. Paytm comes in at a distant third position.
Amid the intense competition, the National Payment Corporation of India had decided to impose market share caps on the volume of payments a particular platform can process.
Kalyan Krishnamurthy, chief executive officer of Flipkart Group, said the move will help PhonePe maximise its potential as it moves to the next phase of its development. It will also maximize value creation for Flipkart and our shareholders, he said.
Flipkart acquired PhonePe in April 2016.