Flipkart, an Indian e-commerce company, announced that they are in a move aimed at widening the digital payment platform’s access to capital to fuel its growth by partially spinning off PhonePe and it will raise primary capital of $700 million.
Spinning off means the creation of an independent company through the sale of shares of a division of a parent company or an existing business and these companies are expected to be worth more as independent entities than a part of a larger business. The importance of the online payment system has been rising day by day and PhonePe’s growth potential made Flipkart board determine that this was the right time to spin-off the company so it can access dedicated capital to fund its long-term needs and ambitions over the next 3-4 years.
The company said that the fund will be raised at a post-money valuation of $5.5billion from existing Flipkart investors led by Walmart. Flipkart will be continuing as the major shareholder of PhonePe. Flipkart and PhonePe had more than 250 million users each which makes them more prominent Indian digital platform. Sameer Nigam, Founder, and CEO at PhonePe said that this partial spin-off gives PhonePe an opening to dedicated long-term capital to pursue the company’s vision of providing financial services to a billion Indians. PhonePe has more than 100 million monthly active users which helped it to achieve 1 billion online transactions in October.
Kalyan Krishnamurthy, CEO of Flipkart Group, said that the company is excited about the group’s prospects if Flipkart’s e-commerce continues to grow strongly by serving all the needs of Indian customers. This Spin-off move will enable PhonePe to maximize its ability as it moves to the next phase of its development, and it will also maximize value creation for Flipkart and its shareholders.
PhonePe competes against other digital payment platforms like Google Pay and Paytm, but the company has its stand in this segment with more than 250 million users. PhonePe shows a good sign of growth as more and more people started to use the digital platforms for payment as it’s more convenient.
