BENGALURU: Digital payments major PhonePe has raised $700 million in a new funding round led by US retail giant Walmart at a $5.5 billion valuation, while announcing a partial spin-off from parent firm Flipkart. Recently, PhonePe surpassed Google Pay and Paytm in clocking the highest number of UPI transactions in October month with more than 100 million active users on the platform. The four-year-old start-up has an user base of 250 million.
The move also provides PhonePe an opportunity to constitute a new Board of Directors focused on supporting its development, and to create a tailor-made equity incentive or ESOP program for its employees. “This partial spin-off gives PhonePe access to dedicated long-term capital to pursue our vision of providing financial inclusion to Indians,” said Sameer Nigam, Founder & CEO, PhonePe.
Flipkart will remain PhonePe’s majority shareholder, and the two businesses will retain their close collaboration, a statement by Flipkart said. The spin-off, which had been in the works for more than a year, means that Flipkart’s stake in PhonePe will reduce from 100 per cent to 87 per cent. Phone Pe’s valuation has also risen by more than $2 billion with analysts saying that the Bengaluru-based digital financial services firm may be one of the start-ups gearing up to launch an IPO.
Besides payments, PhonePe has also expanded digital financial services to travel ticket bookings, health, vehicle insurance, mutual funds . The new funds raised is expected to be utilised in the expansion of the current digital financial services besides tie-ups with the enterprises in the niche verticals.
“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 in a statement. India’s mobile payments market is estimated to reach $1 trillion by 2023, according to Credit Suisse.
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