Flipkart will pay out $700 million in cash to ESOP holders as part of the PhonePe hive off

Flipkart will pay out approximately $700 million in cash to employee stock option holders as part of its move to separate full ownership of payments and financial services unicorn PhonePe, as the e-commerce giant looks to hire and retain talent at a time when most startups in the country are laying off due to the ongoing funding winter.

"We are glad to announce that Flipkart ESOP (employee stock option plan) participants will receive a one-time discretionary cash payout as part of the deal. This compensation is the value of the PhonePe held within certain Flipkart options "Flipkart CEO Kalyan Krishnamurthy informed employees through internal email. A copy of the mail was reviewed by Moneycontrol.

"Flipkart's new share price is $165.83 per option (formerly $189.1), excluding the value of PhonePe. The dividend to employees, however, will be US$43.67 per option, reflecting the increase in PhonePe's market capitalization "Krishnamurthy continued.

While Krishnamurthy did not specify the exact amount of the buyback, a source close to the situation informed Moneycontrol that it will be around $700 million. He also stated that employees who are qualified for the repurchase would be receiving additional information and details on the compensation in the near future. The exact number of employees who will profit from the compensation is unknown. Flipkart has not responded to the story.

Earlier in the day, Flipkart said that it has finalised the full ownership split of PhonePe, just in time for the fintech unicorn's multi-million dollar fundraise, which would be its largest.

PhonePe will be spun out by Flipkart as a separate firm in December 2020. PhonePe raised $700 million from a group of investors, including Walmart, at a valuation of $5.5 billion at the time.

According to some sources, PhonePe may raise a new round headed by General Atlantic in October at a valuation of $12 billion, making it India's most valuable fintech unicorn.

In the same month, PhonePe relocated its registered entity from Singapore to India in preparation for an IPO in the nation. This is in contrast to the fact that most consumer internet companies, including Flipkart, have a foreign residency for tax purposes.

PhonePe co-founder and CEO Sameer Nigam disclosed in a June interview for CNN News18's Bits to Billions that the company is in the process of relocating its registered organisation from Singapore to India. He had stated that the idea had already been approved by the board and that the process was only a matter of time.