UPI payments app PhonePe’s $1.5 billion IPO to see Walmart cut stake

Companies like PhonePe are entitled to an annual incentive for the promotion of low-value UPI transactions. This incentive has been coming down over years.

As India’s biggest Unified Payments Interface (UPI) app PhonePe prepares to list, the updated draft red herring prospectus (DRHP) shows the impact of regulations on the business, and concentration of payments-linked revenue even as UPI lacks MDR (merchant discount rate).

The proposed initial public offering (IPO) includes an offer for sale (OFS) of 50.6 million equity shares.

Existing investors, including promoter WM Digital Commerce Holdings (owned by Walmart International Holdings Inc), plan to offload 45.94 million shares.

Tiger Global and Microsoft will sell 1.039 million and 3.678 million shares, respectively.

According to various media reports, the company is eyeing a valuation of $15 billion and IPO size of around $1.5 billion.

The Bengaluru-based firm reported a consolidated loss of Rs 1,444.42 crore in the first half of 2025-26 (H1FY26).

In comparison, the fintech major’s loss was recorded at Rs 1,203.2 crore in H1FY25.

While the company has been in the red, its losses have come down from Rs 2,796 crore in FY23 to Rs 1,727.4 crore in FY25.

In H1FY26, the company earned Rs 3,918.4 crore in revenue from operations as compared to Rs 3,207.5 crore in H1FY25.

About 82.5 per cent, or Rs 3,231.7 crore, of its operational revenue in H1FY26 came from payments services as compared to over 91.4 per cent in the same period of the previous year.

The dominance of payments in the company’s revenue comes at a time when the firm controls over 45 per cent of monthly UPI transaction volumes.

However, these volumes do not necessarily generate revenue due to the lack of MDR on such real-time payments.

Moreover, companies like PhonePe are entitled to an annual incentive for the promotion of low-value UPI transactions.

This incentive has been coming down over years.

In 2023, PhonePe founder and chief executive officer (CEO) Sameer Nigam had flagged challenges stemming from the zero-MDR regime, arguing that it leads to a “contraction of investment by stakeholders” and that there is no viable, natural business model when MDR is set at zero.

Top line impact

One of PhonePe’s major top-line contributors — income from rent and related payment categories — was discontinued in 2025 following Reserve Bank of India (RBI) guidelines, impacting the company’s revenue.

The category alone represented 17.89 per cent and 22.72 per cent of PhonePe’s revenue in FY25 and FY24, respectively.

In H1FY26, it contributed 13.44 per cent to PhonePe’s top line.

The ban on real money gaming (RMG) last year affected contribution to revenue, which otherwise came from payments services and advertising.

However, it was a minor contributor to the company’s revenue — around 3.5 per cent in FY25 and 4.65 in FY24. During H1FY26, it contributed just 1.84 per cent to the firm’s revenue.

Market share cap

Meanwhile, the National Payments Corporation of India (NPCI) has proposed a 30 per cent cap on the market share of third-party UPI apps.

The proposed implementation of the cap by the end of this year implies that companies with a share of over 30 per cent will have to stop onboarding new users.
 
PhonePe has a registered user base of over 657 million as of September 2025.

Out of this, the monthly active user base stands at 237.75 million.
 
Similarly, the total registered merchant base of the company is recorded at 47.19 million, of which the monthly active is 11.11 million.
 
Founder stake

Cofounders of the company Sameer Nigam and Rahul Chari executed a secondary stake selling of 8.42 million shares each, netting a total of Rs 3,936 crore.

The shares were bought by General Atlantic in September 2025.

PhonePe will join other fintechs such as Paytm, MobiKwik, Pine Labs, and PB Fintech after listing.