Walmart gets US$1b tax bill for PhonePe’s move to India

WALMART and other shareholders of PhonePe will have to pay nearly US$1 billion in tax after the digital payments company moved its headquarters to India, said people familiar with the matter.

The bill stems from the relocation and rise in value of PhonePe, of which Walmart took majority ownership after acquiring its parent outfit, online retailer Flipkart Online Services. Now separated from Flipkart and re-domiciled from Singapore to India, the fintech firm is raising funds at a pre-money valuation of US$12 billion from General Atlantic, Qatar Investment Authority and others. Sources, who requested anonymity, said that this triggered the hefty charge.

Investors, which include Tiger Global Management, purchased shares of PhonePe in India at the new price. This has led to tax implications of about 80 billion rupees (S$1.3 billion) for existing shareholders, said one source.

Representatives of Walmart, Flipkart and Tiger Global did not immediately respond to e-mails requesting comments. A PhonePe spokeswoman declined to comment.

PhonePe will move its headquarters to Bangalore in a step similar to that of its former parent company. But it is unusual for an Indian startup to move home.

For years, technology companies have chosen to incorporate in Singapore due to its friendlier tax regime, ease of getting foreign investments and simpler processes for public debuts on foreign exchanges, all while keeping the bulk of their operations and business in India. Over 8,000 Indian startups have incorporated in Singapore since the year 2000, a report by India Briefing showed.

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PhonePe’s three major moves – relocating to India, carving itself out as a separate entity from Flipkart, and raising funds at a high valuation – come at a time when startups around the world are struggling to raise funds amid deflating valuations.

PhonePe’s relocation could be a precursor to a stock market listing in India. Any payments firm listed overseas would struggle to get a green light from India’s financial and banking regulator, the Reserve Bank of India, one of the sources said. The government currently forbids India-headquartered companies from listing directly on overseas exchanges.

Based on data from the Asian Development Bank, India has over 26,000 startups, making it the world’s third-largest startup ecosystem. At last count, over 100 of these startups were valued at US$1 billion, making them unicorns. BLOOMBERG