PhonePe is no longer a part of Flipkart: $700 million buyback, other details

Indian e-commerce giant Flipkart acquired PhonePe in 2016 and moved the payments firm’s entire base to the country from Singapore. Now, both companies have confirmed that Flipkart no longer owns a stake in PhonePe. Both companies have now announced the completion of the full ownership separation of PhonePe. Moreover, the shareholders in the Singapore entities of both companies have also directly purchased the shares in PhonePe’s India entity. It is important to note that the US-based retail chain Walmart still continues to be the majority shareholder of both concerns.
Flipkart’s take on PhonePe’s separation
According to a report by TechCrunch, the chief executive of Flipkart Group Kalyan Krishnamurthy has said in a statement that the company wants PhonePe to “grow and thrive as a successful organisation in its own right.”. Recently, he also sent an email to the company’s staff to mention that employees with stock option plans will receive a “one-time discretionary cash payout as part of the transaction” with PhonePe. Flipkart will be buying back shares worth nearly $700 million. According to a report by The Economic Times, the employee stock ownership plan (ESOP) buyback will be the largest in the Indian startup ecosystem.
Krishnamurthy also explained that this payout denotes the value of the PhonePe holding within those Flipkart options. The new share price of Flipkart has been determined at $165.83 per option (which previously was $189.1), excluding the value of PhonePe. He also added that this payout will reflect the increase in the market valuation of PhonePe and will be considered at $43.67 per option.

How will this separation affect Flipkart
In 2020, PhonePe announced its plans to become a separate entity. As per the report, Flipkart is unwilling to re-enter the consumer payments market. However, this separation is likely to affect the e-tailer company’s valuation.
PhonePe’s future in the country
PhonePe is one of the major players in the mobile payments market in India. The homegrown UPI app commands over 40% of the market share. Recently, the government announced that it won’t it won’t enforce a check on the market share for players operating on the homegrown payments network until December 31, 2024 Analysts claim that the deadline extension will be a huge benefit for the market leaders like PhonePe and Google Pay, the report adds.
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