India’s largest digital payments platform plans a $1 billion listing while early investors Tiger Global and Microsoft prepare full exits.
PhonePe prepares one of India’s biggest fintech IPOs
Walmart-backed fintech giant PhonePe is targeting a valuation between $9 billion and $10.5 billion for its upcoming initial public offering, according to people familiar with the plans.
The offering could raise $900 million to $1.05 billion, making it India’s second-largest fintech IPO after Paytm’s $20 billion listing in 2021.
However, even the upper end of the valuation range would represent a drop from PhonePe’s $12 billion valuation during its $100 million funding round in 2023.
The IPO is expected to close around April, though the timeline may shift depending on market conditions and geopolitical tensions affecting global equities.
Walmart to reduce stake; early investors exit
The IPO will primarily consist of existing shareholders selling stock rather than new shares being issued.
Key stake sales include:
- Walmart will reduce its holding by about 12%.
- Tiger Global plans a complete exit.
- Microsoft will also sell its entire stake.
Together, the three investors will sell around 50.7 million shares, according to the company’s IPO filing.
Because PhonePe itself is not issuing new shares, the proceeds will go to selling shareholders rather than funding fresh expansion.
India’s payments leader faces intense competition
Founded in 2015 and owned by Walmart-controlled Flipkart, PhonePe has become India’s most widely used digital payments platform.
The company competes directly with:
- Google Pay
- Paytm
- Other fintech payment apps
PhonePe’s scale is significant.
- It has over 650 million registered users.
- It processed nearly 10 billion transactions in January alone.
- Total UPI transactions that month reached 21.7 billion.
That means PhonePe handled nearly half of all UPI activity.
Yet scale alone does not guarantee profitability.
Monetisation remains the biggest challenge
India’s payments ecosystem runs on the Unified Payments Interface (UPI), launched in 2016.
To accelerate adoption and reduce reliance on cash, regulators barred companies from charging transaction fees for UPI payments.
The policy helped India become one of the world’s largest digital payments markets, but it also squeezed margins for fintech companies.
PhonePe’s financials illustrate the dilemma.
- Revenue rose 22% to ₹39.18 billion in the six months ended September 30.
- Losses widened to ₹14.44 billion ($158 million) from ₹12.03 billion a year earlier.
In other words, the company is growing—but profitability remains elusive.
Investor enthusiasm has cooled
Portfolio managers attending pre-IPO roadshows say investor excitement around India’s fintech sector has softened compared with previous years.
One key concern: slowing user growth and unclear monetisation pathways.
“Active users aren’t growing at the same pace, so the game is all about upselling existing customers,” said one portfolio manager who attended the meetings.
Another challenge is the crowded fintech market, where companies often offer similar services.
Without clear differentiation, analysts say valuations can come under pressure, which may explain why PhonePe’s expected IPO valuation trails its previous funding round.
The broader fintech test case
PhonePe’s IPO will serve as a litmus test for India’s fintech sector.
Paytm, once valued at $20 billion at listing, now trades at roughly $7.1 billion market capitalisation, highlighting how quickly investor sentiment can shift.
If PhonePe succeeds in attracting strong demand despite the valuation cut, it could revive momentum for fintech listings.
But if investors remain cautious, the deal may reinforce a broader question hanging over digital payments firms:
Can scale eventually translate into sustainable profits?
TL;DR:
PhonePe is targeting a $9–$10.5 billion valuation in its IPO, aiming to raise up to $1 billion. Walmart will trim its stake while Tiger Global and Microsoft plan exits. Despite massive scale—650 million users and billions of UPI transactions—investors remain cautious due to weak monetisation in India’s fee-free digital payments ecosystem.
