PhonePe valued at $5.5 bn after being spun off from Flipkart Group

Flipkart-owned digital payments platform PhonePe has been partially hived off as a separate entity as it looks to expand in the MSME (micro, small and medium enterprise) market. 

As part of its new journey, the independent unit is also raising $700 million in equity capital at a post-money valuation of  $5.5 billion. The round will be divided into tranches of $350 million each. 

The investment will be led by Flipkart Group’s parent, Bentonville-headquartered retail giant Walmart, according to a statement released on Thursday. 

The shareholding pattern in the new entity will be -- 87% by Flipkart, 10% by Walmart and the remaining 3% held by existing investors in Flipkart, PhonePe said in response to queries from TechCircle. 

The company also confirmed that PhonePe’s board will consist of Flipkart co-founder Binny Bansal, PhonePe cofounders Sameer Nigam and Rahul Chari as well as an independent director at Flipkart, Rohit Bhagat.

Founded in 2015 by former Flipkart employees Nigam and Chari, PhonePe was acquired by Flipkart in 2016 for an undisclosed valuation. The company, which started as a digital wallet, now commands close to 40% market share in UPI based transactions, making it among the top two players. 

The company handled nearly 1 billion transactions for the month of October 2020 and has close to 100 million monthly active users (MAU), according to the statement. 

“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,” Nigam, CEO at PhonePe said in the statement. 

Previously, Walmart indicated that it was looking to unlock the value at PhonePe with the possibility of demerging it from the parent entity of Flipkart Group. Without giving details PhonePe told TechCircle that it will focus on financial services distribution and creating growth platforms for India’s MSME ecosystem from the new investments. 

“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,” Kalyan Krishnamurthy, CEO of Flipkart Group said in the statement.