Walmart to demerge PhonePe, Flipkart to enter India’s e-payment space

With India’s consumer market slated to emerge as the third largest in the world, several global enterprises are looking to establish their presence in growing industry landscape. In fact, despite having a reputable presence in the space, companies are increasingly diversifying to stake a bigger claim in the upcoming market landscape.

A prominent instance of this trend is a plan proposed by Walmart Inc., the American multinational retail giant, to demerge Indian e-payment system and digital wallet firm, PhonePe Private Limited, from Bengaluru-based e-commerce giant, Flipkart, a company in which Walmart holds an ownership stake.

Sources familiar with the matter claim, the move was apparently proposed so that PhonePe’s ownership would be directly vested with the American retail giant. The demerger would pave way for Walmart to enter India’s flourishing digital payments market directly.

The said landscape is currently dominated by SoftBank and Ant Financial backed, online payment company, Paytm. However, competition in the space is set to heat up substantially with global tech giants like Amazon, Facebook and Google testing out the market through their own payment gateways; Amazon Pay, WhatsApp and Google Pay respectively.

The proposed separation is expected to coincide with PhonePe’s current plan to raise funds of over a billion dollars through the sale of primary and secondary shares.

For the record, back in March, Flipkart had rolled out a resolution evolve PhonePe as its own independent entity, since this announcement, news of PhonePe possibly raising fresh funding of approximately $1 billion gained momentum.

The billion dollar PhonePe investment round is picking up momentous steam as investors like Ribbit Capital, Hillhouse Capital, DST Global, Green Oaks and Falcon Edge have expressed their respective interests.

Earlier this year, Flipkart board had approved the hiving off of the two entities under an independent panel. Reliable sources cite, eventually both PhonePe and Flipkart would be listed separately.

Currently, Walmart owns a 82% stake in Flipkart, with Chinese conglomerate, Tencent and American investment company, Tiger Global owning approximately 10%. Additionally, apart from Flipkart cofounder, Binny Bansal, owning 3.52% of the company, several global giants as well as marquee investors like Iconiq Capital, Microsoft, UBS and Temasek together own a stake that is little below 5% in the company.

Following the demerger, Walmart would claim 82% stake in both Flipkart and PhonePe separately, having a combined valuation of $27-30 billion.

Source Credit: https://economictimes.indiatimes.com/industry/services/retail/walmart-plans-to-spin-off-phonepe-from-flipkart/articleshow/71532673.cms?utm_source=ETTopNews&utm_medium=HPTN&utm_campaign=AL1&utm_content=23