Walmart and other stockholders of PhonePe, a digital payments company, would reportedly be responsible for almost $1 billion in tax liability due to the startup's relocation of its headquarters to India.
Investors' Tax Liability
With its acquisition of parent company Flipkart Online Services, Walmart became the largest shareholder of PhonePe, which incurred the aforementioned costs due to its subsequent relocation and subsequent increase in value.
After splitting from Flipkart and moving its headquarters from Singapore to India, the fintech company has raised $12 billion at a pre-money valuation from General Atlantic, Qatar Investment Authority, and others, according to Bloomberg's sources, who refused to be identified as the discussion is confidential.
At the increased price, it is said that investors like Tiger Global Management have bought shares of PhonePe in India, resulting in tax consequences of almost 80 billion rupees (around $900 million) for current owners.
Bloomberg's requests for comment addressed to Walmart, Flipkart, and Tiger Global were not immediately answered. A representative from PhonePe said she could not comment.
PhonePe was founded in 2015 by ex-Flipkart employees Sameer Nigam, Rahul Chari, and Burzin Engineer. When Walmart, the largest retailer in the US, acquired Flipkart in 2018 for $16 billion, it also gained control of the PhonePe payment system.
As of last month, the firm had 415 million users and 30 million merchants registered throughout India.
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Relocation to India
PhonePe will follow in the footsteps of its previous parent firm, online retailer Flipkart, and relocate its headquarters to Bangalore.
When a startup company from India decides to relocate, it is a rare occurrence.
For many years, Singapore has been the preferred incorporation jurisdiction for technology firms based in India. This is because of the country's favorable tax climate, accessibility to foreign investment, and streamlined procedures for making initial public offerings (IPOs) on international stock markets.
According to a study by India Briefing, Singapore has been host to over 8,000 Indian entrepreneurs since the year 2000.
PhonePe's three big moves-relocating to India, splitting out from Flipkart and seeking capital at a high valuation-come as startup companies worldwide struggle to attract cash and face deflated valuations.
The Indian Market
This change may indicate that PhonePe, an online payment service, is getting ready to float on the Indian stock exchange.
One of the persons interviewed speculated that the Reserve Bank of India (RBI), the country's financial and banking authority, would be reluctant to approve any payments company listed outside. Currently, businesses based in India cannot list on foreign stock markets without obtaining permission from the government.
According to the Asian Development Bank, India is home to over 26,000 businesses, making it the third biggest startup ecosystem in the world. Of them, more than 100 are unicorns, each with a valuation of $1 billion or more.
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