Flipkart, a major ecommerce giant in India, controlled by Walmart, which also owns PhonePe digital payments service, has decided to let it be a separate entity. The strategic move aims to raise new fundings for PhonePe, which can go up to $700 million.
"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," Flipkart said.
However, Flipkart will continue to be PhonePe's majority shareholder. In the works for more than a year, the spin-off will reduce Flipkart's ownership in PhonePe from 100% to about 87%. This comes in at a crucial time as India's digital payments landscape has turned extremely competitive, with Google Pay, Paytm, Amazon Pay, and newly launched WhatsApp Pay looking for their share of transactions.
"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," said Sameer Nigam, Founder, and CEO at PhonePe.
Kalyan Krishnamurthy, CEO of Flipkart Group, said, "This move will certainly 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."
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