PhonePe completes separation from parent firm Flipkart; to be India-domiciled now - Economic Times

Ecommerce major Flipkart, which acquired PhonePe in 2016, has completely separated its operations from the digital payments platform, both firms said in a statement on Friday, adding that establishing businesses as individual entities would allow them to chart their own growth paths. As part of the transaction, existing Flipkart Singapore and PhonePe Singapore shareholders, led by Walmart, have purchased shares directly in PhonePe India, bringing to an end a process that began in 2019.

The hive-off also completes a move begun earlier this year to make PhonePe a fully India-domiciled company.

US-based retail giant Walmart will remain the majority shareholder in both PhonePe and Flipkart. In 2018, Walmart had acquired a 77% stake in Flipkart for $16 billion; PhonePe was part of the Flipkart group at the time.

“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,” Sameer Nigam, cofounder & CEO, PhonePe, said on Friday.

The hive-off comes on the back of PhonePe’s ongoing funding round of $1.5-2 billion, which is likely to be led by Walmart and private equity firm General Atlantic, at a valuation of $12 billion. While the primary fundraise is estimated to be $1 billion, there will likely be a secondary share sale, taking the total close to $2 billion. ET had reported on November 29 that Flipkart would facilitate a $700 million Esop buyback as part of PhonePe's latest financing round.

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In an emailed note to employees, Kalyan Krishnamurthy, Flipkart group CEO, said, “As you know, we announced the partial separation of the PhonePe business from our operations in December 2020 to help widen its access to capital for future expansion… Today, we are announcing the full separation of Flipkart and PhonePe so that we can continue our independent growth trajectories while providing value and creating new opportunities for investors to participate in the Indian tech ecosystem. There is no change in the management structure at Flipkart with this development.” Flipkart’s valuation will be readjusted to around $33 billion, down from $37.6 billion, as the online payments firm is no longer part of the group, which still houses fashion etailing platform Myntra.

Following the separation, both business groups will operate as independent entities, with Walmart remaining the majority shareholder of these businesses, Krishnamurthy said.

PhonePe’s fundraise

The Flipkart-PhonePe separation process, which started back in 2019, was aimed at paving the way for PhonePe’s independent fundraise and valuation discovery, bringing external investors on board. In December 2020, the online payments company raised primary capital of $700 million in a round led by Walmart, at a valuation of $5.5 billion.

In October, PhonePe, which was earlier domiciled in Singapore, said that it had completed the process of moving base to India. The company had moved all the businesses and subsidiaries of PhonePe Singapore to PhonePe Pvt Ltd – India, including its insurance broking services and wealth broking businesses, it said in a statement.

PhonePe’s board had also approved the creation of a new Esop pool and the migration of more than 3,000 PhonePe Group employees’ existing Esops by issuing new ones under PhonePe India’s new plan, the digital payments company had said in October.

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PhonePe completes separation from parent firm Flipkart; to be India-domiciled now - Economic Times
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