PhonePe to be hived off, valued at $5.5 bn

BENGALURU: Digital payments major PhonePe has been hived off from parent entity, Walmart-owned Flipkart Group, and will be valued at $5.5 billion, the company said on Thursday.

Flipkart, however, will continue to own majority share of 87% in the hived-off entity PhonePe Private Ltd., with US-retail giant Walmart owning 10% stake, and existing investors including Tiger Global Management holding the remaining 3%, a company spokesperson confirmed to Mint.

Also Read: Inside India’s Quest to Fix Its Payments Puzzle

The company is also raising $700 million as part of this hive-off which will be led by Walmart and see participation from existing investors. The funding will likely come in two tranches, with the first expected next month.

PhonePe confirmed that the fundraise will not see any participation from fresh investors.

Besides becoming an independent entity, PhonePe will also appoint a fresh board of directors, which will include company co-founders Sameer Nigam and Rahul Chari, as well as stalwarts from the BFSI and financial technology ecosystem, said the company.

As part of this corporate restructuring, PhonePe’s Employee Stock Ownership Plan (Esop) pool will be now independent of Flipkart, with all employees having the right to receive PhonePe Esops.

Earlier, some senior PhonePe employees had received Flipkart stocks.

“Flipkart and PhonePe are already among the more prominent Indian digital platforms with over 250 million users each. This partial spin-off gives PhonePe access to dedicated long-term capital to pursue our vision of providing financial inclusion to a billion Indians,” said Sameer Nigam, founder and CEO at PhonePe.

Sources close to the discussion said that this move is in line with PhonePe’s plans of filing an independent Initial Public Offering (IPO). Mint broke the news on PhonePe’s plans to go public by 2023, and turning profitable in the year 2022.

Along with this, the move also signals PhonePe’s vision to be independent of Flipkart, and have external strategic investors to fund its growth in India and other geographies.

“As Flipkart Commerce continues to grow strongly serving the needs of Indian customers, we are excited at the future prospects of the group. This move will help PhonePe maximize its potential as it moves to the next phase of its development, and it will also maximize value creation for Flipkart and our shareholders,” said Kalyan Krishnamurthy, CEO of Flipkart Group.