December 4, 2020: E-commerce major Flipkart on Thursday announced a 'partial spin-off' of PhonePe as the digital payment firm raises USD 700 million in funding, valuing it at USD 5.5 billion.

Flipkart co-founder Binny Bansal will join PhonePe's board of directors, along with the fintech company's co-founders Sameer Nigam and Rahul Chari.

In this financing round, PhonePe is raising USD 700 million (about Rs 5,172 crore) in primary capital at a post-money valuation of USD 5.5 billion from existing Flipkart investors, led by Walmart, a statement said.

Flipkart will remain PhonePe's majority shareholder, and the two businesses will retain their close collaboration, the statement added.

Bansal had resigned from the Flipkart in November 2018, after which he co-founded start-up consultancy xto10x Technologies.

Flipkart, in its statement, said recognising the momentum that has been achieved, as well as PhonePe's significant growth potential, its board had determined that 'this was the right time to partially spin-off PhonePe so it can access dedicated capital to fund its long-term ambitions over the next three to four years'.

'Flipkart and PhonePe are already among the more prominent Indian digital platforms with over 250 million users each. This partial spin-off gives PhonePe access to dedicated long-term capital to pursue our vision of providing financial inclusion to a billion Indians,' PhonePe founder and CEO Nigam said in the statement.

Flipkart said the partial spin-off would also provide PhonePe an opportunity to create a tailor-made equity incentive or ESOP program for its employees.

In 2018, Flipkart was acquired by Walmart, and PhonePe was also part of the transaction.