Flipkart, as part of PhonePe's new financing round, will likely go for a $700 million employee stock buyback. PhonePr expects to raise $1.5-2 billion in this round, which is being led by Walmart, reported the Economic Times.
According to the ET report, several employees were already conveyed about the opportunity to get returns on their stockholdings in the company. But, the official announcement of the upcoming liquidity is expected to be made in a month.
PhonePe will have a separate shareholding structure and will be categorised as an asset in Flipkart's valuation. Post this financing round, Flipkart's valuation will go to $33 billion from the earlier $37.6 billion.
What is ESOP?
The employee stock ownership plan (ESOP) comes at a time when startups are facing a funding crunch due to global economic factors. In ESOP, what happens is the company, incoming investors, or ESOP holders buy existing shares back from the employees, and the employees have to pay tax on the difference between the cost at which they bought the shares and the cost at which they are selling the shares back to the company.
Along with Walmart, American retail titan and private equity fund General Atlantic is also looking to invest $1 billion in PhonePe in primary capital.
Flipkart's previous buybacks
The last buyback by Flipkart was in 2021, when the company bought shares worth $80–$85 million from employees as a part of the financing round. The company is known for its regular ESOP buybacks and also undertook a $500 million buyback in 2018 as part of the deal with Walmart, which took 3-4 years to complete.
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