PhonePe is made in India and will list in India, says CEO Sameer Nigam

"We are a made in India company. Every office, data centre, and employee of ours is here. There is no reason why we should not contribute to wealth creation in this market."

PhonePe's move to bring back its holding entity to India stands in stark contrast to many startups and unicorns who have flipped abroad, choosing to register in Singapore and the US to take advantage of regulations there.

The Walmart and Flipkart-owned company plans to go public once its core businesses turn profitable, which it hopes to achieve by 2023. Currently, PhonePe is a leader in the Unified Payments Interface (UPI) with a 47 percent market share in monthly volumes.

UPI serves as an acquisition funnel for the startup to cross-sell other financial services including mutual funds and insurance.

"We want to be at a stage where our new-age initiatives have achieved sufficient product-market fit and scale so that our revenue pools are diversified enough. I don't want to raise public money to experiment wildly," Nigam said.

However, he added that the path to Dalal Street has multiple challenges for startups, especially when it comes to employee share ownership.

Indian startups have long rallied for a change in tax laws for Employee Stock Ownership Plans (ESOPs) with no success.

ESOPs, a tool that is widely used to attract and retain talent, are now taxed twice -- during the time of exercise and time of sale. In various representations, startups have requested the government to change the tax structure in a way that they can be taxed only at the time of sale and not at the time of exercising.

"The ESOP laws are extremely anti-employee and we need to get those fixed. We will send our feedback to the government on this and explain to them that they are making it very hard for entrepreneurs to actually bring large companies back to India," Nigam said.

In 2021, the year that saw an intense war for retaining talent, over three dozen Indian startups facilitated ESOP buybacks worth $440 million, an eight-fold jump over 2020, according to data by Entrackr.

PhonePe, which is valued at $5.5 billion after it raised $700 million in 2020 from promoters Flipkart and Walmart, is looking to cross its target of doubling its employee headcount to 5,400 by December this year.

'Stocks of good companies will rebound'

The year 2021 stood out for Indian internet IPOs as players like Zomato, Nykaa, Paytm, and PB Fintech (parent of Policybazaar and Paisabazaar) listed. These IPOs attracted new-age investors who have seen these companies grow and have used their products.

"That is a very healthy sign that they believe that these companies have long-term value creation. The market is deep enough, you've seen blockbuster IPO after blockbuster IPO. So I know that the capital is now available for India," said Nigam.

Despite the excitement around these listings, the froth over the stock prices of these internet companies died down as quickly as the hype.

Nykaa's stock has been resilient owing to profitability and strong fundamentals yet the share price is down 38 percent since listing.

Stock prices of Paytm's parent company One97 Communications, Zomato, and PB Fintech have slid 60, 43 and 51 percent respectively below their listing prices.

Of these players, Paytm is a competitor of PhonePe in the financial services super app play. In UPI, Paytm's Payments Bank is the third largest player with a 14 percent share of monthly volumes.

Nigam said, "There are some really good assets that went public. They got caught in the down cycle of the public markets, unfortunately, but I think they will rebound fast. Businesses like Nykaa and Zomato will rebound and are durable businesses. Indian entrepreneurs are learning that public markets behave very, very differently."

Drawing on his point of not wanting to experiment with going public, Nigam said his learning was "don't raise all the money for speculative bets, place the bets beforehand if you can afford to."