Flipkart, PhonePe complete separation as fintech firm preps for fundraise

PhonePe in talks with parent Walmart, General Atlantic, and other investors to raise about $700 mn

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 unlocking enterprise value for shareholders.

A partial separation was announced in December 2020. The PhonePe Group was acquired by the Flipkart Group in 2016 and is now India's largest digital payments platform. The company has more than 400 million registered users and more than one in four Indians avail of its services.

“Flipkart and PhonePe are proud, homegrown Indian brands with a user base upwards of 400 million each,” said Sameer Nigam, founder and chief executive officer (CEO) of PhonePe. “We are looking forward to the next phase of our growth as we invest in new businesses – like insurance, wealth management and lending, while also enabling the next wave of growth for UPI payments in India. This will help propel our vision to provide billions of Indians with financial 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 PhonePe will continue to scale and achieve its vision of providing financial inclusion to millions of Indians,” said Krishnamurthy. “Flipkart stays committed to its purpose to empower 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 purchased shares directly in PhonePe India. The 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 of both business groups.

The development comes at a time when Flipkart and PhonePe are expecting a few big milestones in the next few weeks.

PhonePe is in talks with its parent 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 valuation to around $12 billion and make it India’s most-valued financial technology firm ahead of Razorpay, which is valued at $7.5 billion.

The funding is expected to help PhonePe scale up 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 about $5.5 billion in December 2020 after raising $700 million in primary capital from existing Flipkart investors including Tiger Global, and Walmart.

Their parent company Walmart, the world’s largest retailer, is initiating an employee stock ownership plan (Esop) buyback, under which it may purchase PhonePe stocks worth $700 million from Flipkart employees, say sources. This Esop buyback is part of PhonePe’s fundraising plans.

PhonePe is also set to acquire fintech start-up ZestMoney for $200-300 million and the deal may be closed in the next few weeks, said sources earlier.
 

Out of the wallet

• PhonePe is in talks with  Walmart, General Atlantic, and other existing investors to raise about $700 mn-$1 bn
• Flipkart Singapore,  PhonePe Singapore shareholders have purchased shares directly in PhonePe India
• Walmart will remain the majority shareholder
• Comes when PhonePe is preparing to move its entire base to India