PhonePe takes first step towards IPO, kicks off initial process

PhonePe, the Walmart-owned digital payments platform, has announced its initial preparations for an Initial Public Offering (IPO) in India. The move positions PhonePe among the latest tech unicorns to seek a public listing.

Doug McMillon, CEO of Walmart, confirmed the development, stating, "Our PhonePe team has long aspired to be a public company, and we are excited to take these early steps toward an IPO in India."

A Shift to India and Corporate Restructuring

PhonePe shifted its domicile from Singapore to India in December 2022, aligning its structure with Indian regulatory frameworks. The company has since established a clear corporate hierarchy, with all its new non-payment ventures functioning as fully owned subsidiaries.

Strong Growth Drives IPO Plans

According to PhonePe, the decision to initiate IPO preparations stems from its robust financial performance. The company’s FY23-24 annual report highlights consistent top-line and bottom-line growth across its business segments, making this an opportune time for a public listing. PhonePe was valued at approximately $12 billion in its last private fundraising round.

India’s Leading UPI Player

With a commanding 48% market share in India’s Unified Payments Interface (UPI) ecosystem, PhonePe remains the country's largest digital payments provider. Google Pay follows closely with around 37% of the market.

The National Payments Corporation of India (NPCI) has been working to curb market dominance by capping non-bank third-party UPI apps at 30% market share. While the implementation of this cap has been delayed twice, with the latest deadline set for December 31, 2024, it remains uncertain if the rule will ultimately be enforced.

PhonePe founder Sameer Nigam had previously stated that the company would not proceed with an IPO until there was clarity on the market share cap, noting that investor confidence could be impacted. However, with PhonePe’s continued revenue surge and sustained profitability, the company appears to have gained the confidence to move forward.

Revenue Growth and Profitability

PhonePe reported a 73% year-on-year revenue increase in FY24, reaching ₹5,064 crore, driven by cost efficiency and product diversification. The company also turned profitable, posting an adjusted Profit After Tax (PAT) of ₹197 crore, a significant improvement from the ₹738 crore loss in the previous fiscal year.

Nigam emphasized that a sustainable profit track record was essential before considering a public listing. The latest announcement signals that PhonePe has achieved that stability, setting the stage for its IPO journey.