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When Walmart Inc. paid $16 billion for control of India’s e-commerce pioneer Flipkart Online Services Pvt. last year, the American retail giant got a little-noticed digital payments subsidiary as part of the deal. 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 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 people familiar with the matter, asking not to be named because the discussions are private. The funding may close in the next couple of months, although the talks are not finalized 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 e-mails seeking comment.
Also unresolved are the future roles for Flipkart’s outside investors. Tiger Global Management and Tencent Holdings each hold board seats and equity stakes of about 5%, while Walmart holds about 80%. The board will have to navigate the companies’ varied interests before any deal can be finalized.