Digital payment firm PhonePe has reportedly secured USD 700 million in a new Walmart Inc.-led funding round, at USD 5.5 billion post-money valuation, in a partial spin-off from parent company Flipkart.
The new funding round also marked the presence of existing investors. From the past few quarters, the start-up had been engaging with investors for fresh capital. Earlier this year, the company struggled to raise funds at a USD 3 billion valuation. It had hoped to secure about USD 1 billion at a valuation of up to USD 10 billion before this year.
The partial spin-off indicates that the e-commerce giant Flipkart’s stake in the digital payment company will decrease from 100% to 87%. The partial spin-off provides PhonePe with fresh funding, which it will use to fulfill the company’s vision of offering financial inclusion to billions of Indians. However, the two companies will still maintain their close collaboration, with Flipkart remaining as PhonePe’s majority shareholder.
PhonePe was the first firm to leverage the UPI system and has extended into novel use cases such as bill payments, travel booking, and financial services. The company’s dependence on parent Flipkart has reduced from 50 percent of monthly transactions to below 1 percent today.
Reliable sources cite that PhonePe currently has the maximum mobile payment market share in India, by certain metrics. In October, it had beaten Google Pay to become the leading UPI payments app. The company recorded 835 million UPI transactions in October compared to Google Pay’s 820 million transactions in the same month.
Kalyan Krishnamurthy who is the CEO of Flipkart Group said that as Flipkart Commerce is continuously growing to cater to the needs of Indian consumers, the company is excited for the future prospects of the group. The move would help PhonePe maximize its potential in its next phase of its development, and it would also boost value creation for the company and its shareholders.