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Flipkart to Conduct $700 Million ESOP Buyback Amid PhonePe Funding Round

Flipkart is looking to launch its fourth employee share repurchase (ESOP) program as part of a fresh funding round for digital payments giant PhonePe.

Flipkart may conduct $700 million in employee share buybacks as part of PhonePe’s new funding round. PhonePe is expected to raise between $1.5 billion and $2 billion in the round led by Walmart, The Economic Times (ET) reported.

The round will boost Flipkart’s valuation from $37.6 billion to $33 billion, while PhonePe will have a separate shareholding structure. The report added that PhonePe, worth $5.5 billion, is classified as an asset in Flipkart’s valuation.

“At the $12 billion valuation of the PhonePe deal, the employee group will see about $700 million in liquidation, bringing the total size to over $1.5-2 billion, including secondary stock sales. Employee group shareholders may sell their shares Walmart investment PhonePe’s new round of equity funding will also pay substantial taxes on PhonePe’s proceeds in paper currency, rather than cash,” a person with knowledge of the matter told ET.

Employee stock ownership plans (ESOPs) are launched when start-ups face a funding crunch due to global economic factors. Here, the company buys back shares from employees. In addition, employees are responsible for paying taxes on the difference between the price they paid for the stock and the price they paid to sell it back to the company.

Along with Walmart, General Atlantic may also invest $25-300 million in PhonePe. Flipkart did the last buyback in 2018 as part of its deal with Walmart. At that time, it took 3-4 years to complete.

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