$30 billion of proof that India’s tech scene is back

Bloomberg October 16 | Updated on October 16, 2019 Published on October 16, 2019

PhonePe is preparing to fly solo   -  Bloomberg

Digital-wallet company PhonePe preparing to spin out of Flipkart

India’s largest start-up is ready to birth its own unicorn. That’d be unusual anywhere, but that it’s happening in India offers some hope for the country’s long-awaited tech renaissance.

This is also great news for Walmart Inc. The US retail behemoth paid $16 billion for 77 per cent of e-commerce company Flipkart Group in May last year. That deal included payments unit PhonePe an early pioneer in the digital-wallet business which Flipkart had acquired two years earlier.

Now Walmart is engineering a spinoff as part of a $1-billion funding round that could value payment unit at up to $10 billion and give the retailer an 82 per cent stake in PhonePe and Flipkart, a business daily reported. From one $20.8 billion company 18 months ago, India will get two unicorns at a combined value of up to $30 billion.

There are already indications that PhonePe has shed its Flipkart training wheels. From 50 per cent of its transactions three years ago, Flipkart now accounts for just 0.5 per cent, Indian media outlet The Ken reported, citing PhonePe’s head of strategy and planning. During Flipkart’s annual Big Billion Day’s sale last month, Phone Pe’s logo no longer had top billing on the e-commerce website, according to The Ken. Instead it was listed as just one of the many payment options available to online shoppers.

That PhonePe is preparing to fly solo is also a sign of the country’s maturing digital sector. Not only is the company willing to directly tackle rivals such as Alphabet Inc’s Google Pay and Facebook Inc’s forthcoming WhatsApp payments, but it’s also managing to survive in the scary wilderness beyond the gates of Flipkart. (Survive, of course, is a relative term. It’s likely still burning cash and posting losses, though at least it can keep up with well-funded adversaries,a key measure of success at this point in the game.)

More broadly, the PhonePe spinoff would strengthen the case that a home-grown hero can hold its own when foreign rivals enter. Paytm, another start-up, is on the verge of landing a $2-billion round of funding from investors including Ant Financial, SoftBank Group Corp.and Discovery Capital Management that could give it a $16-billion valuation, Bloomberg reported this week.

Growing tech entrepreneurship

Hopefully, the momentum at both PhonePe and Paytm will spur more Indian entrepreneurship, feeding a rebirth in the tech sector not seen since the IT-outsourcing boom two decades ago. While that gave us Tata Consultancy Services Ltd., Infosys Ltd, Wipro Ltd and dozens more, most of those businesses focusedon serving foreign needs.

Now, a crop of stars is emerging to meet the needs of the country’s 1.3 billion people. It’s not a big step from this spinoff to an actual IPO, a development that will put India back on the global technology map.

This assumes no reduced valuation for Flipkart.

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Published on October 16, 2019
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