PhonePe IPO: Why Macquarie notes costs and revenue factors, but views positive potential

PhonePe, backed by Walmart, gets SEBI approval for a $1.3 billion IPO. Tiger Global and Microsoft exit, Walmart retains majority. Macquarie and Bernstein highlight financial and regulatory risks. By CNBCTV18 Walmart-backed fintech platform PhonePe has received approval from the Securities and Exchange Board of India (SEBI) for its proposed initial public offering and is preparing to enter the capital markets in the coming weeks. The company plans to raise around $1.3 billion (approximately ₹12,000 crore) through the offering. According to its updated draft red herring prospectus (DRHP), the issue will comprise entirely an offer-for-sale (OFS), with no fresh issue of shares. Up to 50.66 million shares will be sold by existing investors, marking a liquidity event. Tiger Global and Microsoft are offering their entire stakes in the company, while Walmart will retain its majority holding and sell up to 45.9 million shares, or roughly 9% of the company. In a recent note, global brokerage Macquarie highlighted certain financial and regulatory risks ahead of the listing. The firm pointed to elevated Employee Stock Ownership Plan (ESOP) expenses, which it said accounted for 46% of PhonePe’s revenue in the first half of FY26 — the highest among its fintech peers. The brokerage said these costs have weighed on EBITDA margins and remain a key factor to monitor. Macquarie also flagged revenue concentration concerns. As per the offer document, around 19% of revenue in H1FY26 (24% in FY25) was derived from segments such as rent payments via credit cards, real-money gaming and Payment Infrastructure Development Fund (PIDF) incentives, some of which have been discontinued or are subject to regulatory restrictions. In addition, dependence on government-provided UPI incentives accounted for roughly 6% of revenue in FY25. PhonePe currently holds over 45% market share in India’s UPI ecosystem. However, the potential implementation of a 30% market share cap by the National Payments Corporation of India (NPCI) by December 31, 2026, could have implications for growth and customer acquisition. Despite these concerns, Macquarie said the IPO could serve as a valuation benchmark for the fintech sector and may influence investor perception of peers such as One97 Communications. Separately, brokerage Bernstein said investors should assess three key areas ahead of the listing: the balance between payment dominance and profitability, the sustainability of financial services growth, and evolving regulatory developments.