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Flipkart, India’s homegrown e-commerce marketplace, on Thursday announced a partial spin-off of its 100 per cent subsidiary PhonePe, India’s largest digital payments platform.
While Flipkart will continue to remain PhonePe’s majority shareholder with 87 per cent stake, 10 per cent will be held by Walmart and 3 per cent by Flipkart’s existing investors including Tiger Global. The move will help PhonePe access dedicated, long-term capital to fund its growth ambitions.
Funding, expansion
Following the partial spin-off, PhonePe is set to raise $700 million in primary capital at a post-money valuation of $5.5 billion from existing Flipkart investors led by Walmart. The money will come in two tranches of $350 million each over the next few months. PhonePe plans to hire 600-700 people in the next 12 months, which will take its headcount to 3,000 by December 2021.
PhonePe, which turned 5 this December, 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.
Recognising this achievement as well as PhonePe’s significant growth potential, Flipkart’s Board decided 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 all its 2,200 full time employees.
Kalyan Krishnamurthy, CEO of Flipkart Group, said, “As Flipkart Commerce continues to grow strongly serving the needs of Indian customers, we are excited at the future prospects of the group. This move will help PhonePe maximise its potential as it moves to the next phase of its development, and it will also maximize value creation for Flipkart and our shareholders.”
“Flipkart and PhonePe are already among the more prominent Indian digital platforms with over 250 million users each. This partial spin-off gives PhonePe access to dedicated long-term capital to pursue our vision of providing financial inclusion to a billion Indians,” said Sameer Nigam in a statement.
Services offered
Using PhonePe, users can send and receive money, recharge mobile, DTH, data cards, pay at stores, make utility payments, buy gold and make investments. PhonePe forayed into financial services in 2017 with the launch of digital gold providing users with a safe and convenient option to buy 24-karat gold securely on its platform. Since then, it has launched Mutual Funds and Insurance financial products like tax-saving funds, liquid funds, international travel insurance and Corona Care, a dedicated insurance product for the COVID-19 pandemic. PhonePe also launched its Switch platform in 2018, and today its customers can place orders on over 260 apps including Ola, Myntra, IRCTC, Goibibo, RedBus, Oyo etc. directly from within the PhonePe mobile app. PhonePe is accepted at 13 million merchant outlets across 500 cities nationally.
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