E-commerce giant Flipkart is doing a partial spin-off of PhonePe, India’s largest digital payments platform. The move will help PhonePe access dedicated, long-term capital to fund its growth ambitions.
In this financing round, PhonePe is raising $700 million in primary capital at a post-money valuation of $5.5 billion from existing Flipkart investors led by Walmart, the world’s largest retailer. PhonePe competes with rivals such as Google Pay, Amazon Pay and Alibaba-backed Paytm.
“Flipkart and PhonePe are already among the more prominent Indian digital platforms, with over 250 million users each,” said Sameer Nigam, Founder and CEO at PhonePe. “This partial spin-off gives PhonePe access to dedicated long-term capital to pursue our vision of providing financial inclusion to a billion Indians.”
In just four years since its founding, PhonePe has crossed the 250 million registered user milestone, with over 100 million monthly active users (MAU) generating nearly one billion digital payment transactions in October 2020. It is targeting to cross 500 million registered users by December 2022.
Recognising the momentum that has been achieved, as well as PhonePe’s significant growth potential, 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 partial spin-off also provides PhonePe an opportunity to constitute a new Board of Directors focused on supporting its development, and to create a tailor-made equity incentive or ESOP program for its employees.
Flipkart will remain PhonePe’s majority shareholder, and the two businesses will retain their close collaboration.
“As Flipkart Commerce continues to grow strongly serving the needs of Indian customers, we are excited at the future prospects of the group,” said Kalyan Krishnamurthy, CEO of Flipkart Group. “This move will help PhonePe maximise its potential as it moves to the next phase of its development, and it will also maximise value creation for Flipkart and our shareholders.”
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