Flipkart will continue to remain a majority shareholder in PhonePe.

PhonePe open on a smartphone with a stack of Rs 2000 notes fanned out below it
Money Payments Thursday, December 03, 2020 - 14:03

E-commerce giant Flipkart partially hived off its digital payments platform PhonePe as a separate entity, the company announced on Thursday. As part of this separation, PhonePe will get a new Board of Directors, and will get to tailor an employee stock option program for its employees. Flipkart will continue to remain a majority shareholder in PhonePe. 

In its current round, PhonePe is raising $700 million in primary capital at a post-money valuation of $5.5 billion from existing Flipkart investors led by Walmart, Flipkart said in a statement. PhonePe currently claims to have over 250 million registered users, with 100 million active users each month and processed nearly a billion digital transactions in October.

The decision, made by Flipkart’s board, was that it was time to partially spin off the platform, and PhonePe can access dedicated capital for its long term plans over the next three to four years. 

Sameer Nigam, Founder and CEO at PhonePe, said, “Flipkart and PhonePe are already among the more prominent Indian digital platforms with over 250M 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.”

“As Flipkart Commerce continues to grow strongly serving the needs of Indian customers, we are excited at the future prospects of the group. 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.

Last month, during Flipkart’s parent company Walmart’s earnings call, Walmart’s President and CEO Doug McMillon had said that the company’s monthly active users are at an all-time high.

However, it is important to note the National Payments Council of India has brought in a new cap, where third-party app providers such as PhonePe cannot process more than 30% of the overall volume of transactions processed in the previous three months. Companies such as PhonePe have two years to comply with the circular. In October, PhonePe had a little more than 40% of the market share by transactions. 

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