Flipkart announces partial spin-off of PhonePe: Here’s what that means

The partial spin-off will also provide 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.

With the partial spin-off, PhonePe will be raising $700Mn in primary capital at a post-money valuation of $5.5Bn from existing Flipkart investors led by Walmart. (PhonePe)

Flipkart on Thursday announced a partial spin-off of PhonePe. The Indian e-commerce giant said that in just four years PhonePe has not only crossed the 250 million registered users but it has also achieved the 100 million monthly active users (MAU) mark in October 2020. And so to keep up this momentum the company decided to take the plunge.

Now the question is, how would this change things for PhonePe and its users? Well, PhonePe users will not see any changes in usage or otherwise, at least in the short term. In the long term, Flipkart says that the partial spin-off will help the digital payments platform to access dedicated capital to fund its long-term ambitions over the next three to four years. In short, PhonePe will be able to grow more and better and possibly allow its platform to add more features to its service.

The partial spin-off will also provide 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.

With the partial spin-off, PhonePe will be raising $700Mn in primary capital at a post-money valuation of $5.5Bn from existing Flipkart investors led by Walmart. Meanwhile, Flipkart will remain PhonePe's majority shareholder, and the two businesses will retain their close collaboration even as the digital payments platform becomes independent.

“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 on the occasion.