Flipkart divests PhonePe, sells partial stake to parent Walmart

Flipkart has divested its fintech platform PhonePe into a separate unit, and partially sold a stake in it to its parent company, Walmart, the Indian ecommerce major said on Thursday.

"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 two ventures said in a joint press release.

The divestiture has helped the payments processor raise $700 million in primary capital as a result, and gives it more autonomy over its operations - including the power to form its own board of directors, and create equity incentives for its employees.

The $700 million fundraise from the spin-off gives PhonePe a post-money valuation of $5.5 billion. Flipkart will continue to retain its majority shareholding in the platform, with an 80 percent stake, and the two businesses will "retain their close collaboration", the companies added.

"The partial spin-off gives PhonePe access to dedicated long-term capital to pursue our vision of providing financial inclusion to a billion Indians," CEO Sameer Nigam said in a statement.

Flipkart CEO Kalyan Krishnamurthy said the move will help "maximise" PhonePe's potential as it moves to the next phase of its development.

In November, the startup said it had crossed 250 million registered users. It reported over 100 monthly active users (MAU) and 2.3 billion app sessions in October, and set a target of crossing 500 million registered users by December 2022.

The startup also said it will invest Rs 800 crore for brand marketing campaigns.

PhonePe competes with the likes of Paytm, MobiKwik, and Google Pay, and allows users to send and receive money, recharge mobile, and make utility payments, as well as buy gold. It recently launched mutual funds and insurance financial products like tax-saving funds, liquid funds, international travel insurance, as well as Corona Care — a dedicated insurance product for the COVID-19 pandemic.

In FY19, PhonePe reported that its losses grew by 2X to Rs 1,907 crore, while its revenue grew 5X between FY18 and FY19 to Rs 245.8 crore.