The $10-billion surprise hiding inside Walmart’s acquisition of Flipkart

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.

PhonePe is an “underappreciated asset,” Edward Yruma, an analyst from KeyBanc Capital Markets, wrote in a recent research note. He estimated the business may be worth $14 billion to $15 billion, separate from Flipkart’s e-commerce operation. The service gained momentum by offering an array of services, including mutual funds, movie tickets and airline bookings. Earlier this year, it began using Bollywood star Aamir Khan in its advertising.

Walmart is still grappling with whether to bring in strategic or financial investors, according to one of the people familiar with the matter. While a strategic investor would likely be better for growth, senior Walmart executives are concerned that such backers typically want more voting rights, the person said. Walmart wants to use the lessons from PhonePe in other operations around the globe.

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