Flipkart and PhonePe separate; deal to convey windfall for Flipkart staff
Six years after Flipkart acquired PhonePe in 2016, the two companies announced today they are going their separate ways, having concluded an uncoupling that began in 2019. The separation means PhonePe is now entirely based in India. It also brings good news for Flipkart employees, who can expect a big year-end payout.
So in this letter:
■ Google to appeal CCI verdict on Android
■ Tredence picks up $175 million funding from Advent
■ Meta to settle Cambridge Analytica case for $725 million
Six years on, Flipkart and PhonePe go their separate ways
Flipkart has completely separated its business operations from Phone’s, the two entities announced on Friday, saying the move would allow both to chart their own growth paths.
Details: As part of this transaction, existing Flipkart Singapore and PhonePe Singapore shareholders, led by Walmart, have bought shares directly in PhonePe India.
This completes the process – which began earlier this year – of making PhonePe a fully India-domiciled company.
The business groups will now operate as independent entities, with Walmart remaining the majority shareholder in both. The US retailer acquired a 77% stake in Flipkart for $16 billion in 2018; PhonePe was part of the Flipkart group at the time.
Flipkart’s valuation will be reduced from $37.6 billion to around $33 billion.
Catch up quick: The Flipkart-PhonePe separation process, which started back in 2019, was aimed at paving the way for PhonePe to raise funds independently and bring external investors on board. In December 2020, the online payments company raised primary capital of $700 million in a round led by Walmart that valued it at $5.5 billion.
In October this year, PhonePe said it had finished moving all the businesses and subsidiaries of PhonePe Singapore to PhonePe Pvt Ltd – India, including its insurance broking services and wealth broking businesses.
New funding: The news comes at a time when PhonePe is looking to close a funding round of $1.5-2 billion and continues to hold talks with the likes of private equity firm General Atlantic and existing investor Tiger Global Management. We reported last month that Flipkart may also opt for a $700 million Esop buyback as part of PhonePe’s new funding round.
Big year-end cash payout coming up for Flipkart employees
As the Flipkart-PhonePe separation was formally announced on Friday, Kalyan Krishnamurthy, CEO of the Flipkart group, told employees in an email they would get “a one-time discretionary cash payout as part of the transaction”.
“This payout represents the value of the PhonePe holding within those Flipkart options. It will present an event for wealth creation for our employees, which has been a continued commitment for Flipkart… Eligible employees will receive additional information and details on this payout shortly,” the email read.
Options price: The new share price of Flipkart has been determined at $165.83 per option (previously $189.1), excluding the value of PhonePe. The payout to employees will, however, be at $43.67 per option, reflecting the increase in PhonePe’s valuation, Krishnamurthy said.
We reported on November 29 that Flipkart was planning an employee stock ownership pool (Esop) buyback worth $700 million – the largest share buyback by a startup in India – for current and former employees.
Part of funding round: The buyback is part of PhonePe’s ongoing funding round of $1.5-2 billion. Walmart is likely to lead the round while General Atlantic will put in about $300-400 million and the rest will come from secondary share sales. In a secondary sale, money doesn’t go to the company but to investors who buy the shares.
Google to appeal CCI verdict on AndroidGoogle said on Friday it will appeal the Competition Commission of India’s (CCI) ruling that ordered it to change its approach to Android and fined it Rs 1,337.76 crore ($162 million) for anti-competitive practices. The tech giant will ask the National Company Law Appellate Tribunal (NCLAT) to revoke the order.
Catch up quick: The competition watchdog ruled in October that Google used its dominant position in markets such as online search and app stores for Android to protect the position of its apps such as Chrome and YouTube in mobile web browsers and online video hosting.
Big deal: About 97% of 600 million devices in India run on Android, according to Counterpoint Research estimates.
‘Setback for users’, says Google: “We have decided to appeal the CCI’s decision on Android as we believe it presents a major setback for our Indian users and businesses who trust Android’s security features, and potentially raising the cost of mobile devices,” a Google spokesperson said on Friday.
Earlier this week, Alphabet CEO Sundar Pichai told us in an interview he was “definitely concerned” by some aspects of the CCI rulings as they could “really set back user privacy and security”.
Worldwide antitrust target: Google has faced increased antitrust scrutiny across the world, including a major setback earlier this year when a European court upheld a 2018 ruling saying it largely confirmed a decision that the company imposed “unlawful restrictions on manufacturers of Android mobile devices”.
Google plans to appeal that decision as well, where it faces a record $4.1 billion fine.
Tredence picks up $175 million funding from Advent
Data analytics company Tredence has raised $175 million in Series B funding from Boston-based private equity giant Advent International. With this, Advent will acquire a minority stake in Tredence. Founder and CEO Shub Bhowmick told us the deal values Tredence at about $500 million.
The timing: The infusion is significant given that a winter funding has engulfed technology startups globally, more so in a sector with few venture-backed firms, such as TPG Capital Asia-backed Fractal Analytics and Brighton Park Capital-backed TheMathCompany.
Previous funding: Tredence previously raised $30 million from private equity firm Chicago Pacific Partners at a $100 million valuation in December 2020.
What’s in it for Tredence? Advent, which will join Tredence’s board, will pitch in with continued investment in vertical and domain expertise, intellectual property and accelerator repository, channel partner development, and operational excellence, the companies said.
ETtech Deals Digest
Tech startups have seen an uptick in investments of late but it’s been a poor year overall, with funding down 35% from last year, according to a Tracxn report. This dip has been driven by a slump in late-stage funding, which is down 45%, the report said.
This week, however, saw two large deals. Bengaluru-based ecommerce platform BigBasket raised $200 million from parent entity Tata Digital and others, while Data analysis company Tredence raised of $175 million from Boston-based Advent International at a valuation of $500 million.
Here are all the startups that raised funds this week.
Meta to settle Cambridge Analytica class-action suit for $725 million
Facebook parent company Meta Platforms has agreed to pay $725 million to resolve a class-action lawsuit accusing the social media giant of allowing third parties, including Cambridge Analytica, to access users’ personal information.
The scandal: The settlement would resolve a long-running lawsuit prompted by revelations in 2018 that Facebook had allowed Cambridge Analytica to access data of as many as 87 million users.
The now-defunct firm worked for former US President Donald Trump’s successful campaign in 2016, and gained access to the personal information from millions of Facebook accounts for the purposes of voter profiling and targeting.
The aftermath: The Cambridge Analytica scandal fueled government investigations into Facebook’s privacy practices, lawsuits and a high-profile US congressional hearing where Mark Zuckerberg was grilled by lawmakers.
In 2019, Facebook agreed to pay $5 billion to resolve a Federal Trade Commission probe into its privacy practices and $100 million to settle US Securities and Exchange Commission claims that it misled investors about the misuse of users’ data.
What Meta said: Meta did not admit wrongdoing as part of the settlement. The company said in a statement that settling was “in the best interest of our community and shareholders.”
Also Read: FTX founder Bankman-Fried to be released on a $250 million bond
Today’s ETtech Top 5 newsletter was curated by Zaheer Merchant in Mumbai and Erick Massey in Delhi. Graphics and illustrations by Rahul Awasthi.