Last year, Walmart Inc. took control over India’s e-commerce pioneer Flipkart Online Services Pvt. The American retail company got little-noticed digital payments supplementary as part of the deal. Today the business is emerging as one of the country’s top start-ups, which is a surprise benefit for Walmart from its largest-ever acquirement.
Flipkart’s board recently accredited the PhonePe Pvt Ltd. unit to become a new entity and explore raising $1 million from outside investors at an estimation of as much as $10 billion. The talks are however, not finalized yet and terms could change, although the funding may schedule in the next couple of months. This will make the unit independent with an investor base, while Walmart owned Flipkart would still be a shareholder. Walmart and Flipkart are yet to comment on this report.
PhonePe Growing into one of India’s Leading Digital Payment firm
PhonePe is in head-to-head competition with Paytm. The company’s growth has been remarkable; its volume and value 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.
In recent research not, Edward Yruma, an analyst from KeyBanc Capital Markets wrote that PHonePe is an underappreciated asset. He anticipated the business may worth $14 billion to $15 billion, separate from Flipkart’s e-commerce operation.
Amazon and Walmart are Spending Billions to win the Indian Market
There was a debate about whether to keep funding the payments business internally or to separate operations to raise outside funds. After investing nearly $300 million into PhonePe, the US retailer Walmart opted for the final course, following the similar steps that Alibaba Group Holding Ltd. made by separating its Alipay business.
Walmart wants to use the programs from PhonePe and operate them around the globe. Also, the future roles for Flipkart’s outside investors are not resolved. Tiger Global Management and Tencent Holdings Ltd. each hold equal stakes of about 5%, while Walmart holds about 80% shares. Before finalizing the deal, the board will have to navigate the varied interests of the company.
According to Credit Suisse Group AG, digital Payments in India are estimated to reach $1 trillion by 2023 from about $200 billion now. Not only PhonePe and Paytm, Google Pay, Amazon Pay but also soon-to-launch WhatsApp payment service will compete for customers. They are taking advantage of a technology backbone that includes 140 of the country’s banks and digital payments companies called India’s Unified Payment Interface.