Walmart injects $700 million in PhonePe to spin-off from Flipkart, valued at $5.5 Billion

PhonePe, the digital payments firm, a sub of Flipkart (Walmart) is partially spinning off. In a statement on Thursday, the firm stated that it has secured $700 million in a new (unnamed) financing round. This round was led by Walmart, with participation from some existing investors, PhonePe said. The new round gave the company a post-money valuation of $5.5 billion. The fund gives a big boost to the confidence investors are showing on PhonePe.

About the spinoff

“Recognizing the momentum that has been achieved, as well as PhonePe’s significant growth potential, Flipkart’s Board determined 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 company said in a statement.

The partial spin-off had been in the works for more than a year. It means that Flipkart’s stake in PhonePe will reduce from 100% to 87%. Flipkart will remain PhonePe’s majority shareholder, and the “two businesses will retain their close collaboration,” Phone Pe said. “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,” Sameer Nigam, Founder and CEO, said.

Meanwhile, Kalyan Krishnamurthy, CEO of Flipkart Group, said that this move will help Phone Pe maximize its potential; as it moves to the next phase of its development. He also said that this will maximize value creation for Flipkart and its shareholders.

A major change in the payments industry?

In a recent report to clients, analysts at Bernstein identified PhonePe as one of the startups in India that could file for an IPO within three years. Further, Google Pay and Paytm, along with the new entrant WhatsApp, are the major competitors of the app. The spin-off and the added capital may push the app to amass greater than the 100 million monthly active users. Further, with this fund, it could even expand globally.