PhonePe’s Sameer Nigam rules out IPO until there is clarity on UPI market share rules

PhonePe CEO Sameer Nigam has voiced significant concerns regarding the company's IPO plans, stating, "We can’t IPO until we have clarity on market share regulations for UPI."

Nigam’s comments underscore the regulatory uncertainties impacting PhonePe’s IPO strategy.

"The UPI market cap overhang is definitely a problem for us. I feel nervous going into the market if there’s a 30 percent market share cap lurking or booming and going and asking retail investors to put money against today’s market share of PhonePe," he explained.

PhonePe currently holds approximately 48 percent of the UPI market share, followed by Google Pay which has around 37 percent.

“I don’t want to go public and ask investors to buy shares without being sure that the company’s value is properly represented,” he said.

This concern is amplified by the National Payments Corporation of India's (NPCI) 2020 guideline to introduce a 30 percent market share limit for third-party app providers (TPAPs), originally set to take effect by December 31, 2022. The deadline was later extended to December 2024. This policy aims to curb the dominance of major players in the digital payments space.

Moneycontrol reported early this year that NPCI is likely to extend the deadline due to legal and implementation challenges.

Since its founding in 2015, PhonePe has marked significant achievements, including diversification into new areas like merchant lending and insurance in 2023. Nigam noted, "Profitability was one big milestone. Second was diversification," referring to the company’s strategic expansion to enhance its market presence and financial stability.

PhonePe reported a significant 73 percent increase in revenue, reaching Rs 5,064 crore for FY24, on the back of cost efficiency and product diversification. PhonePe Group has also turned its Adjusted Profit After Tax (PAT) positive, recording Rs 197 crore, a stark improvement from the Rs 738 crore loss reported last year.

Nigam addressed the broader issue of regulatory compliance, particularly for startups. "The startup ecosystem is not traditionally used to the idea of operating in regulated businesses," he said.

He also compared PhonePe’s regulatory hurdles with those faced by other large tech firms.

“When Swiggy and Ola were starting out, the only regulation they were worried about was around food safety and driver insurance, respectively. For us, it’s about the entire payments ecosystem and its compliance,” Nigam added.

Global expansion plans

Nigam expressed confidence in PhonePe’s ability to expand globally, despite the challenges.

"If we can’t aspire to go global, who can?" he asserted. He revealed plans to enter markets in Europe and the Middle East and noted the support from global investors.

“We have incredible investors backing us, including Walmart and Microsoft. They’re encouraging us to pursue international growth,” he said.