Flipkart announces spin-off of PhonePe, to remain majority shareholder

PhonePe, which competes with Alibaba-backed homegrown payments pioneer Paytm and GooglePay, will raise $700 million in primary capital, Bengaluru-based Flipkart said in a statement.

Walmart Inc-controlled Indian e-commerce firm Flipkart said on Thursday it was partially spinning off PhonePe in a move aimed at widening the digital payments platform’s access to capital to fuel its growth.

Flipkart announced a partial spin-off of PhonePe in a move that will help the digital payments platform to access dedicated, long-term capital to fund its growth ambitions. (Reuters)

PhonePe, which competes with Alibaba-backed homegrown payments pioneer Paytm and GooglePay, will raise $700 million in primary capital, Bengaluru-based Flipkart said in a statement. PhonePe has crossed the 250 million registered user milestone in just four years with over 100 million monthly active users, generating nearly one billion digital payment transactions in October.

Flipkart said its board of directors 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 employee stock option (ESOP) programme for its employees.

In this financing round, PhonePe is raising 700 million dollars in primary capital at a post-money valuation of 5.5 billion dollars from existing Flipkart investors led by Walmart.

Flipkart will remain PhonePe’s majority shareholder, and the two businesses will retain their close collaboration.