IPO of PhonePe: Can the massive fintech company persuade consumers that it's about more than just payments?

Ahead of IPO, PhonePe Bets Beyond Payments as Lending, Insurance Scale Up

As digital payments major PhonePe prepares for a public listing within the next three months, its draft prospectus shows the Walmart-owned firm is actively expanding beyond its core payments business to build new growth engines.

According to updated draft IPO papers filed last week, the contribution of payments to PhonePe’s operating revenues declined to 86.92% in the first half of FY26, from 92.32% a year earlier, as newer verticals such as lending and insurance grew at a faster pace.

While payments remain dominant, they are no longer the sole driver of growth. Revenue from the payments business rose 15% year-on-year to ₹3,405 crore in the six months ended September 2025, compared with ₹2,961 crore in the year-ago period. Over the same period, revenues from lending and insurance distribution more than doubled to ₹452 crore, lifting their share of operating revenues to 11.55% from 6.76%.

Push for NBFC licence

PhonePe’s ambitions extend beyond distribution. The company disclosed that it is making its third attempt to secure a non-banking finance company (NBFC) licence from the Reserve Bank of India, a move aimed at improving margins in credit disbursals and deepening its financial services offerings.

Growth accelerates, losses widen

The expansion has come at a cost. For the six months ended September 2025, PhonePe reported a 22% year-on-year rise in operating revenues to ₹3,918 crore. Net losses widened to ₹1,444 crore from ₹1,203 crore a year earlier, driven by higher spending on expansion, technology and customer acquisition.

Total expenses during the April–September period climbed to ₹6,069 crore, from ₹4,680 crore in the previous year.

The contrast with listed peer Paytm is notable. Paytm reported operating revenues of ₹3,979 crore and a net profit of ₹144 crore for the same period, with expenses of ₹4,078 crore, highlighting differing cost structures and paths to profitability among India’s largest fintech firms.

Regulatory headwinds

PhonePe’s filing also flags regulatory disruption as a key risk. For the year ended March 2025, rent payments and real money gaming (RMG) together accounted for about ₹1,507 crore, or 21.3% of operating revenues. Of this, ₹1,262 crore came from rent-related services and ₹245 crore from RMG advertising and payment gateway services.

Both revenue 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 RBI barred rent payments through certain channels in September 2025. The twin regulatory moves hit some of PhonePe’s higher-margin businesses.

From Flipkart arm to fintech heavyweight

Founded in 2015 by Sameer Nigam and Rahul Chari, PhonePe was acquired by Walmart as part of its investment in Flipkart. In 2020, Flipkart carved out the payments business into a separate entity, valuing PhonePe at $5.5 billion.

Ahead of the IPO, Walmart holds 71.7% of PhonePe, followed by General Atlantic with 8.9%, while the two cofounders own 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, aligning itself more closely with its core market and listing ambitions. As of September 30, the company reported 657.5 million registered users and 420.7 million yearly active users.

UPI cap overhang

Another overhang is the National Payments Corporation of India’s proposed 30% cap on UPI transaction volumes for any single third-party app. The policy aims to curb concentration risk and prevent a duopoly between PhonePe and Google Pay.

As of December 2025, PhonePe processed 9.8 billion UPI transactions worth ₹13.6 lakh crore, giving it about 48% market share by volume. Although the deadline for implementing the cap has been pushed to December 31, 2026, it remains a structural constraint on future growth.

IPO structure and investors

Backed by investors including Walmart, General Atlantic, Tiger Global and Microsoft, PhonePe’s IPO is expected to value the company at around $15 billion. The offering will be entirely an offer for sale of 50 million shares.

Walmart plans to sell up to 45.9 million shares, while Microsoft and Tiger Global will divest 3.67 million and 1 million shares, respectively. Kotak Mahindra Capital, JPMorgan India, Citigroup and Morgan Stanley are the book-running lead managers.

The filing also discloses significant secondary transactions. In September 2025, Nigam and Chari sold shares worth about $430 million to General Atlantic as part of a $600 million secondary deal that also allowed employees to monetise vested ESOPs.

Testing market conditions

PhonePe’s filing comes amid volatile equity markets driven by geopolitical uncertainty linked to developments in the United States. Even so, recent big-ticket listings in India’s new-age tech sector suggest investor appetite remains intact, potentially easing the path for one of the country’s most closely watched fintech IPOs.