Is PhonePe's IPO pause a calculated move or a valuation-driven decision? Explained

Walmart-backed Indian fintech company PhonePe has temporarily halted its initial public offering (IPO) plans due to geopolitical tensions and instability in global capital markets, the firm announced on Monday, March 16.

PhonePe, which operates the most widely used digital payments application in India, intends to continue its listing process once market stability is restored, as stated in a release.

The ongoing conflict in the Middle East has unsettled market sentiment around the globe, leaving investors concerned about the possibility of extended conflicts.

This situation has negatively impacted market launches from Hong Kong to London, with Indian assets facing pressure as the rupee reached all-time lows and the benchmark equity index dropped 5.5% since the onset of the war, exacerbating their underperformance compared to emerging markets.

In light of PhonePe's decision to temporarily suspend its public listing, certain market analyses have tried to link the delay to "valuation mismatches." However, a more thorough examination of the global economic situation and the company’s internal fundamentals indicates that this choice may be motivated by a focus on long-term stability rather than short-term market fluctuations. Let’s explore what experts and investors are saying.

Here's what experts say

Anuj Gupta, a SEBI-registered market expert, believes that the move is not a surprise and looks like a calculated move taken by PhonePe's management, rather than a valuation-related metric.

Gupta added that amid escalating US-Iran war, the global equities are under pressure and launching an IPO in such a volatile market won't be a wise move. So, the market was also expecting a pause or some delay in the launch of the much-awaited public issue. Some other much-awaited IPOs have also done this earlier.

“So, one should view this pause in Phonepe's IPO as a tactical move rather than any other angle,” opined Gupta.

Similarly, Avinash Gorakshakar, a SEBI-registered fundamental equity analyst, said that amid high volatility in the equity market, and no signs of de-escalation in the US-Iran war, it would have been a suicidal step to come with an IPO that is eagerly awaited by the investors.

“Sometimes a good quality company's IPO fails to get strong response because retail investors remain shy of any investment due to the market volatility. So, PhonePe hasn't taken any surprising step to pause it's public offer in current market scenario and to some extent, even market was estimating about such move,” added Gorakshakar.

Here's what investors say

According to the company, institutional investors closely monitoring the fintech industry believe that this decision is both anticipated and wise. Several investors mentioned that the current global volatility complicates the pricing of any significant IPO. "When the global macroeconomic situation is so unpredictable, it’s typical for companies with solid balance sheets to wait for a clearer window," commented one venture partner.

Another investor referred to the delay as a "temporary and intelligent choice," enabling the company to sidestep the "panic pricing" that frequently arises during periods of geopolitical tension.

Favourable Regulatory Tailwinds

PhonePe is confident that after receiving SEBI approval in January 2026, it has an 18-month period to time its IPO, enabling it to wait for better market conditions instead of hurrying in a volatile environment.

On the operational front, PhonePe has achieved free cash flow positivity, producing over ₹1,200 crore in operating cash flow, which reduces any pressure to secure capital for survival. Although the company continues to face reported losses due to one-time, non-cash ESOP expenses associated with its reverse flip to India, it remains fundamentally profitable, with an adjusted PAT of approximately ₹630 crore.

Moreover, with 42% of its revenue now originating from non-payment sectors such as merchant services, insurance, and lending, PhonePe has indicated that it is effectively diversifying and monetizing its extensive user base of 650 million.

PhonePe IPO details

In light of the recent approval from the Securities and Exchange Board of India (SEBI), PhonePe has submitted its Updated Draft Red Herring Prospectus (UDRHP), getting closer to its much-anticipated public listing. The company, which originally filed confidential IPO documents in September 2024, is now expected to make its market debut soon.

As per the UDRHP, the public offering will feature an offer for sale of up to 50,660,446 equity shares, led by the major shareholder Walmart along with other prominent investors such as Tiger Global and Microsoft.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.