PhonePe to list on Indian exchanges, begins IPO process

PhonePe founders Sameer Nigam (R) and Rahul Chari (L)

Walmart-owned digital payments platform PhonePe on February 20 announced that it is starting preparatory steps for a potential initial public offering (IPO) to list on Indian exchanges, becoming the latest tech unicorn to join the IPO bandwagon.

"PhonePe, our fintech business, is making preparations for an IPO in India. Our PhonePe team has long aspired to be a public company and we are excited to be taking these early steps," said Doug McMillon, CEO of Walmart.

PhonePe redomiciled from Singapore to India in December 2022. The company said it has established a clear corporate structure with each of its new non-payment businesses as fully owned subsidiaries.

"PhonePe's strong top-line and bottom-line growth across its diverse business portfolio, as detailed in its FY23-24 annual report, makes this a suitable time to prepare for a public listing" the company said.

The company was valued at around $12 billion in its last private fundraising.

Largest UPI app

The Bengaluru-based company is the country's largest digital payments player with close to 48 percent market share in Unified Payments Interface (UPI), the real-time mobile payments platform run by National Payments Corporation of India. Google Pay is the second largest player with around 37 percent of the market.

NPCI has been trying hard to encourage other fintech apps to make UPI more competitive to dislodge the duopoly. The organisation had earlier mandated that no single non-bank third-party app should have more than 30 percent of the market.

However, NPCI was forced to extend the deadline twice, for a period of two years as the implementation plan would likely inconvenience customers with the latest being on December 31, 2024.

PhonePe founder Sameer Nigam had mentioned that the company would not go for an IPO until there was clarity on the market share cap. "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.

It is not clear whether the two-year extension is enough clarity for PhonePe though multiple industry executives and bankers feel that the market cap rule might never be implemented. By the time PhonePe goes through the IPO process, it will be close to the expiry of the deadline extension by NPCI.

However, the payments firm's revenue growth has been encouraging and could have been a deciding factor for the company to go ahead with the IPO plan.

In FY24, the Bengaluru-based company reported a 73 percent year-on-year increase in revenue at Rs 5,064 crore on the back of cost efficiency and product diversification. PhonePe Group recorded adjusted Profit After Tax (PAT) of Rs 197 crore, against a loss of Rs 738 crore in the previous year.

Nigam said that the company will go for a public listing only if PhonePe can report net profit sustainably over some time. The latest move is an indication that the company has been able to manage its profitability during the current fiscal as well.