PhonePe’s IPO gamble: Can UPI dominance finally pay off?

Synopsis Fintech giant PhonePe is preparing for its public listing. Its massive scale in UPI payments is a key strength. The company is now focused on expanding into higher-margin financial services like loans and insurance. This strategy aims to leverage its large user base for deeper engagement and revenue growth. Fintech startup PhonePe is gearing up for its public listing following SEBI approval and its draft prospectus makes it clear that dominance in UPI payments has given the fintech massive scale. However, the IPO story now hinges on whether it can turn that scale into sustainable, higher-margin revenue. Founded in 2015 by Sameer Nigam, Rahul Chari, and Burzin Engineer, PhonePe launched its UPI platform in 2016, right as India’s digital payment revolution took off. Over the years, the app has grown into a household name, and in the past three fiscal years, it has deliberately pivoted from a pure payments engine to a diversified financial services ecosystem, targeting higher-margin offerings for its over 650 million registered users. In its updated DRHP, PhonePe lays out what it calls a “growth flywheel” strategy — using its vast payments user base to drive transactions, generate data and cross-sell financial products such as loans, insurance and investments. The goal is to move beyond low-margin payments into a broader financial services business. The scale of PhonePe’s payments business is hard to miss. As of September 2025, the platform had 657.56 million registered users and accounted for 49% of UPI peer-to-peer transaction volumes. But the company argues that growth is no longer just about adding users — it is about deeper engagement. User activity has picked up sharply over the past two years. Transactions per customer rose from 25.5 in FY23 to 38.1 in FY25, while total customer transactions increased nearly 51%. Over the same period, total payment value almost doubled, climbing from Rs 69.55 lakh crore to Rs 132.70 lakh crore. PhonePe says this reflects users adopting more use cases, increasing habit formation and platform stickiness. Live Events A similar strategy is playing out on the merchant side. PhonePe had 47.19 million registered merchants, with 11.11 million monthly active merchants—about 54% of India’s estimated UPI-using merchant base. The company is pushing tools such as smart speakers and payment gateway solutions to convert more merchants into active participants on its platform. Beyond payments, PhonePe has expanded into lending and insurance distribution, which together now contribute around 10% of total revenue, and into wealth products through its Share.Market platform offering mutual funds and stock broking. Financially, the pivot is beginning to show in revenue growth, though profitability remains a challenge. PhonePe’s revenue rose 40% year-on-year to Rs 7,114.86 crore in FY25, while adjusted EBITDA more than doubled to Rs 1,477.19 crore, pointing to improving operating leverage. However, the company reported a net loss of Rs 1,727 crore in FY25, with losses widening to Rs 1,444 crore in the six months ended September 2025 as expenses increased. The company credits part of its efficiency to operational discipline and in-house infrastructure. With over Rs 3,373 crore invested in domestic data centres and servers, PhonePe ensures 100% data localisation and long-term cost benefits without linear increases in overheads. (You can now subscribe to our Economic Times WhatsApp channel) (Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.) Subscribe to The Economic Times Prime and read the ET ePaper online. ...moreless (You can now subscribe to our Economic Times WhatsApp channel) (Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.) Subscribe to The Economic Times Prime and read the ET ePaper online. ...moreless