Flipkart, PhonePe complete separation as fintech firm gears up for fundraising
E-commerce giant Flipkart and PhonePe on Friday announced the full ownership separation of the digital payments platform, setting the two businesses to chart their own paths and unlock corporate value for shareholders.
A partial separation was announced in December 2020. PhonePe Group was acquired by Flipkart Group in 2016 and is now India’s largest digital payment platform. The company has more than 400 million registered users and more than one in four Indians use its services.
“Flipkart and PhonePe are proud, homegrown Indian brands with a user base of over 400 million each,” said Sameer Nigam, Founder and Chief Executive Officer (CEO) of PhonePe. “We look forward to the next phase of our growth as we invest in new businesses – such as insurance, wealth management and lending, while enabling the next wave of growth for UPI payments in India. This will help drive our vision to provide billions of promote economic inclusion.”
Kalyan Krishnamurthy, CEO of Flipkart Group, said his company has developed successful entrepreneurs and seen impactful businesses started by former employees.
“We are confident that PhonePe will continue to scale and achieve its vision of providing financial inclusion to millions of Indians,” Krishnamurthy said. “Flipkart remains committed to the purpose of empowering every Indian’s dream by delivering value through innovation in technology and commerce, while helping small businesses connect to pan-India markets.”
Existing Flipkart Singapore and PhonePe Singapore shareholders, led by Walmart, have bought shares directly in PhonePe India. This completes the move to make PhonePe a fully India-domiciled company, a process that started earlier this year. Retail giant Walmart will remain the majority shareholder in both business groups.
The development comes at a time when Flipkart and PhonePe are expecting some major milestones in the coming weeks.
PhonePe is in talks with its parent company Walmart, General Atlantic and other existing investors to raise about $700 million-$1 billion, sources said. The round is expected to more than double PhonePe’s value to around $12 billion and make it India’s most valued financial technology company ahead of Razorpay, which is valued at $7.5 billion.
The funding is expected to help PhonePe scale up its operations and help it compete with Google Pay, Paytm and Amazon Pay in Indian fintech, which is expected to touch $350 billion in enterprise value by 2026, according to a report by Bain and Company.
PhonePe was last valued at around $5.5 billion in December 2020 after raising $700 million in seed capital from existing Flipkart investors including Tiger Global and Walmart.
Their parent company Walmart, the world’s largest retailer, is launching an employee share ownership buyback plan (Esop), under which it can buy $700 million worth of PhonePe shares from Flipkart employees, sources said. This Esop buyback is part of PhonePe’s fundraising plans.
PhonePe is also set to buy fintech startup ZestMoney for $200-300 million, and the deal could close in the next few weeks, sources said earlier.
