PhonePe IPO: Can the fintech giant convince markets it’s about more than payments?

Synopsis According to the updated draft IPO papers filed last week, the contribution of payments to the Walmart-owned firm’s operating revenues declined to 86.92% in H1FY26 from 92.32% a year prior, as newer verticals like lending and insurance scaled faster. While still dominant, payments are no longer the sole growth engine PhonePe is relying on to make its case before the public markets. Listen to this article in summarized format As digital payments major PhonePe prepares for a public listing within the next three months, its draft prospectus has revealed that the company is trying to expand its scope of operations beyond payments. According to the updated draft IPO papers filed last week, the contribution of payments to the Walmart-owned firm’s operating revenues declined to 86.92% in H1FY26 from 92.32% a year prior, as newer verticals like lending and insurance scaled faster. While still dominant, payments are no longer the sole growth engine PhonePe is relying on to make its case before the public markets. Revenues from the payments business rose 15% to Rs 3,405 crore in the six-month period ended September 2025, up from Rs 2,961 crore in the corresponding period last year. Over the same period, revenues from lending and insurance distribution more than doubled to Rs 452 crore, lifting their contribution to 11.55% from 6.76% a year earlier. Chasing an NBFC licence PhonePe’s ambitions extend beyond its current offerings. According to the filing, the company is making its third attempt to secure a non-banking finance company (NBFC) licence from the Reserve Bank of India (RBI), as it plans to expand its margins in the credit disbursals business. Growth accelerates, costs rise faster PhonePe's expansion has continued to come at a high cost. For the six months ended September 2025, the company reported a 22% year-on-year (YoY) increase in operating revenues, to Rs 3,918 crore. Net losses, however, widened to Rs 1,444 crore, from Rs 1,203 crore a year earlier, driven by higher spending on expansion, technology, and customer acquisition. Total expenses during the April-September period climbed sharply to Rs 6,069 crore, from Rs 4,680 crore in the previous year. The contrast with listed peer Paytm is interesting. Paytm reported operating revenues of Rs 3,979 crore and a net profit of Rs 144 crore for the same period, with overall expenses of Rs 4,078 crore, indicating differing cost structures and paths to profitability among India’s largest fintechs. Also Read: IPO-bound PhonePe cofounders sold stake worth $430 million to General Atlantic in 2025 Regulatory shock One of the most critical risks flagged in PhonePe’s filing is regulatory disruption. For the year ended March 2025, revenue from rent payments and real money gaming (RMG) accounted for around Rs 1,507 crore, or about 21.3% of operating revenues. Of this, Rs 1,262 crore came from rent-related services, while Rs 245 crore was from RMG advertising and payment gateway services. Both streams have since been effectively shut. In August 2025, the government banned real money gaming under the Promotion and Regulation of Online Gaming Act, while the Reserve Bank of India barred rent payments through certain channels in September 2025. For PhonePe, this was a double whammy, particularly as RMG had been among the company’s higher-margin businesses. From Flipkart’s payments arm to a fintech heavyweight Founded in 2015 by Sameer Nigam and Rahul Chari, PhonePe was acquired by Walmart as part of its investment in ecommerce major Flipkart. In 2020, Flipkart carved out the payments business into a separate entity, valuing PhonePe at $5.5 billion, a move that gave the company operational independence and a clearer path to scale. Ahead of the IPO, Walmart holds 71.7% of PhonePe, followed by General Atlantic with 8.9%, while the two cofounders retain about 2.5% each. The company was last valued at $12 billion in 2023, when it raised $350 million from General Atlantic. In 2022, PhonePe redomiciled from Singapore to India, becoming one of the earliest startups to do so as regulatory clarity and listing prospects improved in the country. The move aligned the company structurally and legally with its core market. As of September 30, PhonePe reported 657.5 million registered users and 420.7 million yearly active users. The UPI cap overhang Another looming concern is the National Payments Corporation of India’s (NPCI) proposed 30% cap on UPI transaction volumes for any single third-party app. The move is aimed at reducing concentration risk and preventing a duopoly between PhonePe and Google Pay. Per NPCI data for December 2025, PhonePe processed 9.8 billion transactions worth Rs 13.6 lakh crore, commanding a market share of about 48% by volume among the top 10 UPI apps. Other major players behind PhonePe include Google Pay, Paytm, Navi, and Flipkart-backed Super.money. Although the implementation deadline has been pushed to December 31, 2026, due to operational challenges, the policy remains a structural constraint that could limit incremental growth for PhonePe. Also Read: UPI rebounds from November dip, ends December with new high of 21.6 billion transactions worth Rs 28 lakh crore Who’s backing and exiting? Backed by global investors including Walmart, General Atlantic, Tiger Global, and Microsoft, the initial public offering (IPO) is expected to value PhonePe at around $15 billion. The issue will be entirely an offer for sale of 50 million shares by existing shareholders, following the company’s confidential filing in September 2024. Walmart, through WM Digital Commerce Holdings, plans to sell up to 45.9 million shares, while Microsoft and Tiger Global will divest 3.67 million and 1 million shares, respectively. For its public issue, PhonePe has appointed Kotak Mahindra Capital, JPMorgan India, Citigroup, and Morgan Stanley as book running lead managers. The filing also reveals significant secondary transactions. In September 2025, Nigam and Chari sold shares worth about $430 million to General Atlantic, while employees monetised vested Esops. The deals were part of a $600 million secondary transaction, lifting General Atlantic’s stake in the company. A tricky listing window PhonePe’s filing comes amid choppy equity markets driven by geopolitical uncertainty linked to developments in the US under President Donald Trump. Even so, PhonePe’s IPO may not worry its backers, with several new-age tech listings having minted billionaires as early shareholders exited through big-bang public market debuts at companies such as Urban Company, Groww, Lenskart, Meesho and Pine Labs. (Catch all the Technology News News, and Latest News Updates on The Economic Times.) ...more