Walmart last year took over India’s e-commerce giant Flipkart, the deal also included the digital payment subsidiary PhonePe. Now the business is emerging as one of the country’s top startups, a surprise benefit for Walmart from its largest-ever acquisition.
Flipkart’s board recently authorized the PhonePe Pvt Ltd. unit to become a new entity and explore raising $1 billion from outside investors at a valuation of as much as $10 billion, according to expert sources. The funding may close in the next couple of months, although the talks are not finalised and terms could still change, they said. The unit would then become independent with a distinct investor base, although Walmart-owned Flipkart would remain a shareholder. Walmart and Flipkart didn’t respond to emails seeking comment.
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PhonePe has grown into one of India’s leading digital payments companies. Its volume and value of transactions have roughly quadrupled over the past year as the country’s consumers adopt the technology to transfer money digitally to businesses and each other. PhonePe is gaining ground on Paytm, which leads the field and is backed by Warren Buffett.
The startup was founded in December 2015 by three friends who left Flipkart to get it off the ground. Within a year, Flipkart founders Binny Bansal and Sachin Bansal decided to acquire PhonePe, realizing that solving payments friction would make it easier for consumers to buy online.
Less than a year later, the Indian government made the unprecedented move to ban large banknotes to curb corruption and boost digital transactions. With this “demonetization,” Paytm, PhonePe and other fledgling services flourished.