Relocation Woes: Walmart, Other PhonePe Shareholders To Pay $1 Bn In Taxes

SUMMARY

Walmart and other other shareholders of PhonePe will have to foot the bill owing to considerations regarding relocation and rise in value of the startup

The digital payments major is raising funds at a pre-money valuation of $12 Bn from General Atlantic, Qatar Investment Authority and others

Last month, ecommerce major Flipkart hived off the digital payments platform as a separate entity

Shareholders of digital payments giant PhonePe will have to reportedly pay $1 Bn in taxes to the Indian government following its decision to shift headquarters to India.

Walmart and other other shareholders of PhonePe will have to shell out the money owing to considerations regarding relocation and rise in value of PhonePe, Bloomberg reported citing sources.

The report said that the digital payments major is raising funds at a pre-money valuation of $12 Bn from General Atlantic, Qatar Investment Authority and other investors. Subsequently, investors such as Tiger Global Management have purchased the shares of PhonePe in the country at the new price, which has triggered the steep tax bill of roughly INR 8,000 Cr for existing shareholders.

This comes nearly a fortnight after ecommerce major Flipkart hived off the digital payments platform as a separate entity. The deal involved existing shareholders of Flipkart Singapore and PhonePe Singapore, led by Walmart, purchasing shares directly in PhonePe India.

The transaction saw PhonePe re-domiciled in India from Singapore after a nearly year-long process.

Interestingly, the startup was last valued at around $5.5 Bn in December 2020. The new valuation is more than double than what was last reported. The move to India could largely be attributed to PhonePe’s plans to list on the Indian bourses.

A Reversal Of Sorts

The general trend among Indian startups is that they move to Singapore due to its lower tax regime. The recent past has seen an exodus of companies to Singapore owing to uncertain regulations and regulatory crackdown in certain sectors such as fintech in India.

As per a report, more than 8,000 Indian startups have incorporated in Singapore since 2000, pointing to its popularity as an alternative destination among Indian startups.

PhonePe is one of the few Indian startups that left the shores of the country, only to return back a few years later.

Meanwhile, the digital payments platform continues to post heavy losses. PhonePe reported a net loss of INR 2,013.7 Cr in FY22, up 16.4% from FY21. However, its total revenue jumped 133% year-on-year (YoY) to INR 1,692.7 Cr in FY22.

PhonePe is India’s biggest digital payments platform, processing the highest volume of digital payments in the country. It competes with the likes of Google Pay and Paytm.