Walmart Inc. and other PhonPe shareholders will have to pay nearly USD 1 billion in taxes after the digital payments company relocated its headquarters to India, according to the media report.
The bill is the result of the relocation and increase in value of PhonePe which Walmart acquired a majority stake in after acquiring parent company Flipkart Online Services. The fintech firm is raising funds at a USD 12 billion pre-money valuation from General Atlantic, Qatar Investment Authority and others, triggering the hefty charge, the people said, declining to be identified because they were discussing a private matter.
Investors such as Tiger Global Management have now purchased PhonePe shares in India at the new price, resulting in tax implications of approximately 80 billion rupees for existing shareholders, according to one of the people.
PhonePe, like its former parent company Flipkart, is relocating its headquarters to Bangalore. Moving home is an unusual step for an Indian startup. For many years, technology companies with the majority of their operations and business in India have chosen to incorporate in Singapore due to the friendlier tax regime, ease of obtaining foreign investments and simpler processes for making their public debuts on foreign exchanges.
According to a report by India Briefing, over 8,000 Indian startups have incorporated in Singapore since the year 2000. PhonePe’s three major moves – relocating to India, separating itself from Flipkart, and raising funds at a high valuation – come at a time when startups around the world are struggling to raise funds and face deflating valuations.
PhonePe’s change could be a sign that the digital payments company is getting ready to go public in India. According to one of the sources, any payments firm listed outside of India would face difficulties obtaining approval from India’s financial and banking regulator, the Reserve Bank of India. The government currently prohibits Indian-based companies from directly listing on foreign exchanges.
According to the Asian Development Bank, India has over 26,000 startups, making it the world’s third-largest startup ecosystem, and at last count, over 100 of these were valued at USD 1 billion, making them unicorns.