What led to PhonePe delaying its IPO? Beyond war, valuation a major concern: sources

Synopsis

PhonePe has postponed its $1.3 billion IPO due to volatile markets, valuation concerns and geopolitical tensions. The Walmart-owned firm, valued at nearly $15 billion, saw investor interest closer to $7 billion. Competition with Paytm and regulatory headwinds also affected its profitability outlook and listing timing.

Digital payments major PhonePe’s $1.3 billion IPO has been deferred amid pricing concerns, volatile market conditions and geopolitical conflicts. The Walmart-owned company, presently valued at around $15 billion, was getting investor interest at around $7 billion, people in the know said.

While the current stock market volatility stemming from the crisis in West Asia was one of the major concerns behind delaying a public listing of such a size, valuation was also emerging as a point of contention between the bankers and the company, the people said.

“In these current market conditions, only those listings are going ahead where the management is ready with a lower valuation. The question is how low can one go,” said a senior banker in the know.

On Monday, the Bengaluru-headquartered company issued a statement saying the IPO is deferred due to current volatile conditions. “We sincerely hope for a swift return to peace in all the affected regions. We remain committed to a public listing in India,” said Sameer Nigam, chief executive officer, PhonePe.

PhonePe is going public at a time when there are two large payment firms already listed on the stock markets, Paytm and Pine Labs. While Pine Labs is mostly a merchant payment company, Paytm competes with PhonePe directly.

Paytm is currently trading at a market capitalisation of around $7 billion. “The valuation was always a point of concern and with the recent regulatory interventions around rental payments there has been a further hit on revenue growth rates,” said the banker quoted above.

A recent Bernstein report noted that in the first half of the current financial year, PhonePe’s path to profitability was impacted by regulatory headwinds in FY26.

Additionally, the excessive reliance on digital payments for revenue generation was also resulting in the company reporting slower growth. In H1 FY26, PhonePe got 82% of its revenue from payments and 12% from lending.

High Esop (employee stock ownership) cost had also emerged as a point of concern for bankers underwriting the company, another industry executive told ET. According to a recent report by UBS, the Esop expense as a share of its revenue for PhonePe stood at 64% in H1 FY26, compared to 2.3% for Paytm and 7.5% for Pine Labs.

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