Walmart’s Flipkart Planning To Spin Out Mobile Payments Arm PhonePe

Walmart-owned Indian eCommerce business Flipkart is planning to sell off a percentage of its digital payments division PhonePe in an effort to facilitate funding for expansion.

Chief executive officer of PhonePe Sameer Nigam said in a statement on Thursday (Dec. 3) that selling off a stake will give the startup “dedicated long-term capital to pursue our vision of providing financial inclusion to a billion Indians.”

Flipkart will retain a majority stake in PhonePe, and the $700 million fundraise at a $5.5 billion post-money valuation will be led by Walmart and other previous investors. Post-spin-off, PhonePe will institute a new board of directors to facilitate growth and launch a custom equity incentive, or ESOP, program for its employees.

“This move will help PhonePe maximize its potential as it moves to the next phase of its development, and it will also maximize value creation for Flipkart and our shareholders,” said Kalyan Krishnamurthy, chief executive officer of Flipkart.

Founded in 2016 by Nigam, Burzin Engineer and Rahul Chari, PhonePe has more than 250 million registered users and over 100 million monthly active users (MAU). In October, the digital payments startup processed $1 billion in transactions.

India’s largest digital payments platform, PhonePe’s biggest rivals are Paytm, which is backed by Alibaba, and Google Pay.

The Indian digital payments market is anticipated to reach $135 billion in 2023, which is more than twice the size it was last year, Reuters reported.

The fast acceleration of FinTech and related antitrust concerns have prompted the National Payments Corp of India (NPCI) to start limiting the percentage of digital transactions for any single company. The move is expected to stifle the growth of payments services offered by PhonePe as well as Facebook and Google.

In an October PYMNTS interview, Karthik Raghupathy said that the pandemic has reduced the use of cash in India, which has accelerated mobile app transactions. Even people normally skittish about digital payments have turned to it as online shopping became the new normal.