Why The PhonePe IPO Looks Nothing Like Paytm’s

PhonePe is no longer just India’s UPI giant—it’s becoming a full-stack financial ecosystem. After a string of high-profile IPOs last year, including Meesho, Groww and Urban Company, 2026 is shaping up to be another defining year for India’s startup listings. 

Among all the names, PhonePe is one of the most anticipated, and the company is set to make a debut soon after receiving the go-ahead from SEBI. 

The Bengaluru-based fintech, which commands nearly 46% of India’s UPI market, is on the cusp of a $1 Bn+ IPO after filing its updated draft red herring prospectus (DRHP) earlier this week. 

The headline figure reminds us of the time when fintech rival Paytm went public, raising INR 18,300 Cr from public market investors, back in 2021. That was the first such mega IPO from a new-age tech startup in India, and PhonePe would be looking to create a similar buzz. 

Like PhonePe, Paytm went public armed with a super app strategy built around payments. And like Paytm, PhonePe is looking to go public despite booking losses in the past two fiscal years. 

But what makes PhonePe’s listing so different is that it isn’t about raising capital to fund growth like Paytm did nearly five years ago. 

Instead, the potential IPO is structured entirely as an offer-for-sale (OFS), allowing its promoter to partially divest while the company retains control and continues its strategic expansion.

In other words, this IPO is a statement of strength and maturity, signalling that PhonePe is confident in its core platform and financial footing. The story behind the IPO goes beyond numbers and market share. 

Over the years, PhonePe has evolved from a pure-play UPI app into a multi-vertical fintech platform. Payments remain its distribution engine, but lending, insurance, merchant services, and data-led offerings are steadily becoming new revenue levers. 

By listing through an OFS, PhonePe is signalling that its growth plans are already funded, and that the next phase is about monetising scale, institutionalising ownership, and cementing its leadership in India’s digital financial ecosystem.

This isn’t just about going public, it’s about redefining what a fintech IPO can look like in India. Unlike Paytm or other early fintech listings that raised massive capital to cover losses or fund expansion, PhonePe is stepping into the markets from a position of confidence, letting investors buy into an established platform rather than betting on future growth alone. 

For investors, the key question isn’t whether PhonePe can dominate UPI, the answer is already clear but whether it can convert that dominance into diversified, sustainable revenue streams across multiple financial verticals.

A Different Kind Of Fintech IPO

First let’s take a look at PhonePe’s IPO structure. PhonePe’s proposed initial public offering is structured entirely as an OFS, with no fresh issue of shares, a choice that sets it apart from several recent consumer internet listings.

At a structural level, this signals that PhonePe is approaching the public markets from a position of relative balance-sheet comfort. Unlike IPOs that are designed primarily to fund expansion, offset losses, or shore up capital adequacy, PhonePe’s listing appears aimed at providing liquidity, enabling price discovery, and establishing a public market benchmark for one of India’s largest fintech platforms.

According to analysts, such a structure is often used by mature, late-stage companies that already have access to internal accruals or parent-level support for funding requirements.

“For investors, a pure OFS from a market leader should not be seen as a lack of growth intent. Instead, it reflects balance-sheet confidence. PhonePe is not coming to the market to fund expansion; it is coming to institutionalise ownership, provide liquidity to shareholders, and formalise its valuation in public markets,” Sourav Choudhary, MD, Raghunath Capital, said.

This sharply contrasts with earlier fintech listings like Paytm, where large capital raises were required to fund growth and cover operating losses. PhonePe’s decision to list without raising capital suggests that its growth plans are already funded and its core platform economics are stable, he added,

The OFS format also allows PhonePe’s shareholders, most notably Walmart, to partially monetise their investment while retaining control. Importantly, there is no indication of a promoter exit; Walmart remains the dominant shareholder even after the proposed sale. This nuance matters, as Indian public market investors tend to differentiate between partial stake dilution and a broader withdrawal of promoter confidence.

However, the absence of a fresh issue also means that new investors are not funding incremental growth, but rather buying into the existing equity story. As a result, the valuation debate around the IPO is likely to focus less on capital deployment plans and more on long-term earnings potential, competitive positioning, and the scalability of PhonePe’s business model beyond payments.

Another notable aspect of the structure is PhonePe’s decision to list under SEBI’s Regulation 6(2), which allows technology-driven companies that may not meet traditional profitability thresholds to access public markets. This framework, while increasingly common for digital-first companies, places greater emphasis on disclosures, governance, and risk transparency rather than near-term profits.

Hence, PhonePe’s issue structure suggests a measured entry into public markets, prioritising liquidity and legitimacy over capital raising. Whether public investors reward this approach will depend on how convincingly the company articulates its path to sustainable monetisation in a tightly regulated fintech environment.

PhonePe’s Bet Beyond UPI

While PhonePe is best known as India’s largest UPI app, its underlying business tells a more layered story. Over the years, the company has steadily evolved into a multi-vertical financial services and digital distribution platform, with payments serving as the entry point rather than the end goal.

At the core remains its payments engine, which gives PhonePe unmatched reach and transaction scale. But payments, especially UPI, are structurally low-margin, constrained by regulatory caps on pricing and the absence of merchant discount rates. Acknowledging these limits early, PhonePe has been methodically building adjacent businesses designed to monetise its distribution advantage.

Paytm’s experience with the revenue diversification in the past was not as smooth as the company suffered multiple regulatory blows and there were RBI-mandated changes to digital lending partnerships. In contrast, PhonePe has significantly more regulatory clarity ahead of its IPO.

“While UPI monetisation remains structurally limited, PhonePe’s long-term revenue opportunities lie beyond payments, in merchant services, lending and credit distribution, insurance, wealth products, and data-led financial services. Payments act as the distribution layer; monetisation follows through adjacent financial offerings,” added Choudhary.

Insurance has emerged as one of the clearest examples of this strategy in action. Last year, the Walmart-backed fintech partnered with multiple insurers to roll out vehicle insurance products for two-wheelers and four-wheelers. Today, PhonePe’s insurance portfolio spans life, health, travel, and motor insurance, backed by its insurance broking licence secured from IRDAI in 2021.

Lending is another area of expansion, though with a measured approach. This is where Paytm has a big lead over PhonePe thanks to rewriting its partnerships over the past two years.

Similarly, in 2025, PhonePe stepped up partnerships with banks and NBFCs but stopped short of becoming a balance-sheet lender. Instead, it operates as a lending service provider (LSP), focusing on sourcing, distribution, and collections rather than taking on credit risk.

According to Inc42’s earlier reporting, the company also sharpened its execution on the ground, activating field agents to strengthen collections and investing in fraud prevention to support the scaling of its lending vertical.

The financial impact of this diversification is beginning to show. In the first half of FY26, lending and insurance distribution accounted for 11.5% of revenue from operations, up sharply from 6.8% in the same period last year. Hence, revenue from these segments rose to INR 452.6 Cr, compared to INR 216.8 Cr a year earlier.

In comparison, Paytm reported more than INR 611 Cr in revenue from financial services in Q2 FY26, significantly higher than PhonePe’s figures for all of H1 FY26.

During H1 FY26, PhonePe’s net loss widened over 20% to INR 1,444.4 Cr, compared to INR 1,203.2 Cr in the same period last year, as margins came under pressure. Notably, losses would have been higher had it not been for an exceptional gain of INR 434.5 Cr, stemming from the divestment of a 5% stake in MapmyIndia. The company offloaded the stake for INR 480.9 Cr in June last year, with the bulk of the gain recognised as an exceptional item in H1 FY26.

On the topline, however, momentum remained intact. Operating revenue rose 22.2% year-on-year to INR 3,918.5 Cr in H1 FY26, up from INR 3,207.5 Cr a year earlier. Payments continued to be the largest contributor, generating INR 3,231.7 Cr, a 10.2% increase over the previous year’s INR 2,932.3 Cr.

However, the numbers underline a clear shift in PhonePe’s revenue mix. Future growth is increasingly being shaped not by payments volume alone, but by how effectively it converts that scale into monetisable financial services.

What Investors Will Be Watching

As PhonePe heads into the public markets, institutional investors are likely to assess the company less through the lens of past tech IPO performances and more as core digital infrastructure within India’s financial ecosystem. Scale, market leadership, and platform stickiness are expected to matter more than near-term profitability optics.

PhonePe is entering the markets at a stage where dominance is well established, competitive intensity is manageable, and the platform has become deeply embedded in India’s digital payments rails. This IPO is less about raising capital for growth and more about formalising leadership, enabling liquidity, and institutionalising ownership, according to market analysts.

PhonePe expects payments to remain the core distribution layer, while future revenue growth is likely to be driven by higher monetisation from lending distribution, insurance, merchant services, and data-led offerings. The company has also flagged continued investments in technology infrastructure, fraud prevention, compliance, and platform resilience.

For public market investors, the bet is clear. PhonePe is not asking to be valued as a high-growth but fragile tech story. It is positioning itself as financial infrastructure with optionality, a platform where dominance is already priced in, and the upside lies in how effectively it converts that dominance into sustainable earnings over time.

Markets Watch: New Issues, Post-IPO Journey & More

• Urban Company Losses Narrow: Urban Company reported INR 21.3 Cr net loss in Q3 FY26 due to continued investments in its InstaHelp quick housekeeping service, though losses narrowed sharply by 64% from the previous quarter.
• Bluestone Turns Profitable: Bluestone swung to a INR 68.9 Cr net profit in Q3 FY26 from losses in both the year-ago and preceding September quarters, marking a sharp turnaround in profitability.
• ideaForge Losses Widen: ideaForge’s net loss widened 41% year-on-year to INR 33.9 Cr in Q3 FY26 and rose 73% sequentially, marking its sixth consecutive loss-making quarter.
• Institutions Lead ShadowFax IPO: The ShadowFax IPO was subscribed 2.72X, led by strong QIB demand at 3.81X, with solid interest also seen from retail investors and employees.

[Edited by Nikhil Subramaniam]

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