PhonePe’s IPO Isn’t About Payments. It’s About Pricing Power.

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What is market leadership actually worth? That is the real question at the center of PhonePe’s upcoming IPO.

On January 21, the company filed its draft papers. For most Indians, PhonePe is not a brand they evaluate. It is an instinct. You scan, you pay, you move on. It processes more UPI transactions than any other app in the country, holding roughly 49 percent market share in a field of more than 80 players.

By volume, it is the king of India’s digital payments stack. But public markets do not price volume. They price durability. And that is where this IPO gets complicated.

No fintech IPO in India now exists in isolation. Everything is viewed through the lens of Paytm.

Four years ago, Paytm listed at a valuation of around $20 billion. It was one of the most anticipated tech listings in Indian history. Today, its market cap sits near $7.9 billion, and the stock trades roughly 40 percent below its issue price.

The volatility reshaped investor psychology.

Fintech, once priced on user growth and ecosystem ambition, is now interrogated for margin clarity and regulatory resilience. Paytm’s public journey did not kill the category, but it hardened it.

PhonePe is entering the market with that memory already embedded in the room.

PhonePe is looking to raise about $1.3 billion. But this is not a growth capital story.

The entire issue is structured as an offer for sale. No new money flows into the company. Early investors are cashing out. Tiger Global Management and Microsoft are exiting fully. Walmart, which owns roughly 72 percent of PhonePe after investing around $700 million over time, is selling about 9 percent of its stake.

Post listing, public shareholders will own roughly 10 percent of the company. When insiders sell into an IPO, investors ask a simple question: why now?

PhonePe was last valued at $12 billion in 2023. Bankers expect the IPO valuation to land between $12 and $15 billion. At the upper end, that places PhonePe at a meaningful premium to Paytm’s current market cap.

But here’s the subtle tension.

Some investors anchor to Paytm’s IPO valuation. Others anchor to Paytm’s current valuation. And those are two very different psychological baselines. The market’s response will reveal which anchor matters more in 2026.

At the business level, PhonePe and Paytm look similar. Both earn from payments. Both distribute financial products like loans, insurance, and mutual funds. Both operate in a UPI ecosystem where margins are structurally thin. But the revenue mix tells a deeper story.

In the half year ended September, over 80 percent of PhonePe’s operating revenue came from payments. For Paytm, payments contributed only about 55 percent. Nearly 30 percent of Paytm’s revenue came from financial product distribution. For PhonePe, that number was just 13 percent. That difference matters.

Payments are scale-heavy and margin-light. Financial products are margin-rich but require underwriting partnerships, merchant engagement, and deeper credit penetration.

Paytm began distributing consumer loans in 2017 and moved aggressively into merchant lending. PhonePe only began merchant loan distribution in 2023. In other words, PhonePe dominates transactions. Paytm diversified earlier.

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The revenue environment is also shifting. Government incentives tied to digital payments infrastructure reportedly ended in December 2025. For PhonePe, those incentives contributed about ₹167 crore in the six months ended September, with minimal associated costs. That is high-quality revenue disappearing.

Another revenue stream vanished when PhonePe stopped processing rent payments via credit cards after RBI intervention. That feature accounted for roughly 18 percent of FY25 operating revenue. Add to that the Supreme Court ban on real-money gaming, trimming another 3.5 percent.

Taken together, the business is entering public markets with revenue headwinds already visible.

Then comes the uncomfortable data point. Paytm turned profitable in mid-2025, reporting ₹144 crore in profit for the six months ended September. PhonePe reported a loss of ₹1,444 crore in the same period. Leadership in UPI volume has not translated into profitability. Yet.

This is the core tension.

If payments remain a low-margin utility, scale alone does not guarantee earnings. The real lever is financial services penetration. PhonePe has over 600 million registered users and 47 million merchants. But without meaningful cross-sell into higher-yield products, that base becomes expensive infrastructure.

PhonePe does enter markets with advantages. Walmart’s backing offers stability. The company maintains a cleaner governance narrative compared to Paytm’s regulatory turbulence. It held around ₹6,300 crore in cash at the end of FY25.

And it took a deliberate structural step to prepare for listing. In 2023, Walmart paid nearly $1 billion in taxes to shift PhonePe’s domicile from Singapore back to India. That was not a small gesture. It signaled long-term commitment and raised expectations for valuation discipline.

But public markets do not reward effort. They reward outcomes.

India’s UPI ecosystem is extraordinary in scale, but brutally competitive in economics. With user overlap rising across telecom apps, payment platforms, and credit marketplaces, incremental growth becomes harder.

When 600 million users already sit in your funnel, growth is no longer about acquisition. It is about monetization. The IPO, then, is not a referendum on PhonePe’s dominance. That is already established. It is a referendum on whether market leadership in a zero-MDR payments ecosystem can evolve into a stable, profitable financial services platform.

If investors believe PhonePe can convert scale into durable margins, a premium valuation makes sense. If they believe payments leadership is a ceiling, not a springboard, then the Paytm precedent looms large.

PhonePe’s listing will test how India’s public markets price digital infrastructure.

Is 49 percent UPI share a defensible moat or a commoditized utility? Is Walmart’s backing an endorsement or an exit signal? Is loss-making leadership acceptable if profitability is visible on the horizon?

This IPO is bigger than a fundraising event. It is the next chapter in how Indian fintech graduates from growth theater to public market discipline. And when the dust settles, we may finally get an answer to that opening question.

What, in today’s market, is leadership really worth?

Interested in learning more about Fintech? Check out our previous coverage here:

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