Global retail giant Walmart has plans to spin off India’s PhonePe from Flipkart and create a separate entity, the Economic Times reported on Friday (Oct. 11).
Online Indian retailer Flipkart, of which Walmart has majority ownership, uses India-based PhonePe as its payment system and digital wallet. Flipkart owned PhonePe prior to being acquired by Walmart.
The maneuver will set the stage for Walmart to directly enter India’s busy eCommerce space and cement its ownership of PhonePe as a separate entity, sources told ET. Goldman Sachs is said to be handling the deal.
Walmart owns roughly 82 percent of Flipkart; China’s Tencent and Tiger Global own 10 percent. The remaining 8 percent is held by Flipkart Co-founder Binny Bansal, along with investors such as Microsoft and UBS.
PhonePe – which means “on the phone” in Hindi and is pronounced “phone pay” – is among India’s strongest digital payments firms, along with competitors Ant Financial and SoftBank-backed Paytm.
When Walmart Inc. paid $16 billion for control of Flipkart in 2018, PhonePe was a surprise part of the deal.
News of the spin-off comes on the heels of PhonePe’s $7 billion valuation in September by Morgan Stanley. PhonePe was valued at $1 billion during its last funding round, so the jump in value has been significant. In a bull case, the company could be worth as much as $20 billion.
The payments space in India is expected to grow more than 20 percent over the next four years. The space is fairly crowded, with Google Pay and Amazon Pay both trying to capture a portion of the market. Also, WhatsApp has plans to enter the space, with 400 million users currently in the country.
PhonePe was started in 2015 by Sameer Nigam, Rahul Chari and Burzin Engineer, who used to be executives at Flipkart.