PhonePe begins IPO journey with top banks, aiming for one of India’s biggest tech market listings

Digital payments behemoth PhonePe has officially set its sights on the public markets, initiating its much-anticipated Initial Public Offering (IPO) journey. The move marks a significant milestone for the company, poised to become one of India’s most prominent tech listings in recent memory. Sources close to the development revealed to CNBC-TV18 on Monday evening that PhonePe has enlisted a formidable lineup of global and domestic banking giants to steer its public debut.

Leading the charge as lead managers for the offering are renowned financial institutions including Kotak Mahindra Capital, global stalwarts JPMorgan Chase, Citigroup, and Morgan Stanley. This robust syndicate underscores the scale and ambition of PhonePe’s public offering, signaling strong institutional confidence in the company’s future trajectory.

Industry insiders indicate that PhonePe is aiming to raise a substantial $1.5 billion through its IPO, targeting an ambitious valuation of up to $15 billion. The substantial capital infusion is earmarked for strategic growth initiatives: aggressively scaling up its burgeoning financial services portfolio, fortifying its existing market-leading businesses, and pursuing opportune strategic acquisitions that will further consolidate its position in India’s rapidly evolving digital ecosystem.

The Ascent of a Digital Payments Giant: PhonePe’s Formative Years

PhonePe’s journey from a nascent startup to a digital payments juggernaut is a testament to the transformative power of India’s digital revolution. Founded in December 2015 by a visionary trio – Sameer Nigam, Rahul Chari, and Burzin Engineer – PhonePe emerged at a pivotal time when India was on the cusp of embracing digital transactions. The founders, with their deep understanding of the Indian consumer and technological prowess, aimed to create a seamless and inclusive digital payments experience.

A pivotal moment in PhonePe’s early history came in 2016 when it was strategically acquired by Flipkart, India’s leading e-commerce giant. This acquisition provided PhonePe with immediate access to a vast user base, robust technological infrastructure, and significant capital, enabling it to accelerate its growth and innovation. The synergy between e-commerce and digital payments proved instrumental, allowing PhonePe to integrate its payment solutions seamlessly into Flipkart’s shopping experience, thereby driving adoption and transaction volumes. This period laid the groundwork for PhonePe’s eventual dominance in the UPI landscape.

Walmart’s Strategic Embrace and Global Backing

The narrative took another significant turn in 2018 with the blockbuster acquisition of Flipkart by American retail behemoth Walmart. This mega-deal, which saw Walmart acquire a majority stake in Flipkart, inherently brought PhonePe into Walmart’s expansive global portfolio. Walmart’s backing provided PhonePe with unprecedented financial muscle, strategic guidance, and global insights, solidifying its position as a key player in the Indian fintech space. While Walmart’s primary business lies in retail, its investment in PhonePe through Flipkart signaled its long-term vision for digital commerce and financial services in high-growth markets like India. The association with a global retail giant of Walmart’s stature also significantly enhanced PhonePe’s credibility with investors, partners, and regulators.

The Strategic Imperative: Demerger and Domicile Shift

A critical precursor to PhonePe’s current IPO plans was its strategic separation from Flipkart. In 2023, PhonePe successfully completed a full demerger from the Flipkart Group, becoming an independent entity. This demerger was not merely an administrative exercise but a strategic move designed to unlock PhonePe’s independent growth potential and provide it with the flexibility to pursue its own listing path.

Concurrently, and perhaps even more significantly, PhonePe undertook the complex and crucial process of shifting its domicile from Singapore to India. This ‘re-domiciliation’ was a clear indication of the company’s intent to list domestically on Indian stock exchanges. For Indian tech companies that have historically been domiciled abroad for various reasons (including easier access to foreign capital and regulatory environments), a shift back to India often signals maturity, confidence in the domestic market, and a desire to align with national aspirations for a vibrant local startup ecosystem. This move streamlined regulatory compliance for an Indian listing and also resonated positively with nationalist sentiments around ‘Made in India’ and ‘Digital India’ initiatives.

PhonePe’s Ecosystem: Beyond Payments

While digital payments remain PhonePe’s bedrock, its evolution has seen it transform into a diversified financial services platform. Backed by its strong foundation in the Unified Payments Interface (UPI), PhonePe has strategically expanded its offerings to become a comprehensive financial super-app.

Dominance in UPI: The Backbone of Digital India

At the heart of PhonePe’s success is its formidable presence in UPI. The Unified Payments Interface, developed by the National Payments Corporation of India (NPCI), has revolutionized digital transactions in India by enabling instant, real-time payments between bank accounts via mobile phones. PhonePe has consistently been one of the leading players in the UPI ecosystem, often commanding the largest market share in terms of transaction volume.

PhonePe’s strategic focus on user experience, reliability, and innovative features has cemented its leadership. Its intuitive interface, coupled with aggressive marketing and cashback incentives in its early days, attracted millions of users. The sheer volume of transactions processed daily on its platform showcases its critical role in India’s digital economy. The intense competition from rivals like Google Pay, Paytm, and other bank-led apps keeps PhonePe on its toes, constantly innovating to retain its edge in this high-stakes arena. Its ability to process large transaction volumes reliably is a key asset that differentiates it from newer entrants.

Foraying into Financial Services: A Holistic Approach

Recognizing the immense potential in cross-selling financial products to its vast user base, PhonePe has strategically diversified into several key areas:

• Insurance: PhonePe has emerged as a significant player in the digital insurance distribution space. It offers a wide array of insurance products, including vehicle insurance, health insurance, travel insurance, and life insurance, by partnering with leading insurance providers. Its approach focuses on simplifying the often-complex insurance buying process, making it accessible and understandable for the average user directly from their mobile app. This democratizes access to financial protection, a crucial need in India. The convenience of comparing policies and making payments directly on the platform has been a major draw.
• Mutual Funds: PhonePe provides a simplified platform for investing in mutual funds, catering especially to new or retail investors who might find traditional investment channels intimidating. It offers curated investment options, easy-to-understand information, and the convenience of starting Systematic Investment Plans (SIPs) with small amounts. This initiative aligns with India’s broader goal of increasing financial literacy and encouraging retail participation in capital markets.
• Digital Gold: The platform facilitates the buying and selling of digital gold, offering a secure and convenient way for users to invest in gold without the hassles of physical storage. This has proven popular, especially during festive seasons or as a small-ticket investment option.
• Lending: PhonePe has gradually ventured into the lending space, initially through partnerships, offering products like small personal loans, merchant loans, and potentially Buy Now, Pay Later (BNPL) options. This segment represents a massive opportunity in India, where access to formal credit remains a challenge for many, particularly in semi-urban and rural areas. Leveraging its vast transaction data, PhonePe can assess creditworthiness and offer tailored financial products, contributing to financial inclusion.

Strategic Acquisitions: Fueling Ecosystem Expansion

The earmarked funds for “strategic acquisitions” signal PhonePe’s intent to further broaden its capabilities and consolidate its market position. Potential acquisition targets could include:

• Smaller fintech startups specializing in niche areas like wealth management, credit scoring, or advanced analytics.
• Companies that can enhance PhonePe’s technology stack, particularly in areas like AI, machine learning for fraud detection, or data analytics.
• Platforms that can provide access to new customer segments or geographic regions, further expanding PhonePe’s reach beyond its current stronghold.
  This M&A strategy is typical for maturing tech companies looking to accelerate growth and fend off competition.

The IPO Rationale: A New Chapter for PhonePe

In an exclusive conversation with CNBC-TV18 last month in May, PhonePe’s chief executive, Sameer Nigam, articulated the strategic reasoning behind the company’s decision to go public. He emphasized that PhonePe’s core payments business had reached a stage of maturity and had firmly established market leadership. This critical juncture, he explained, makes the company ready to embrace the enhanced transparency, stringent governance, and increased accountability that comes with being a publicly listed entity.

“We should hopefully remain stable and be profitable in years to come,” Nigam stated, exuding confidence in the company’s financial health and the broader sector’s positive outlook. This statement is particularly noteworthy in the current market environment, where investors are increasingly prioritizing profitability and sustainable business models over pure growth metrics, especially for tech companies. PhonePe’s shift towards sustained profitability indicates a mature business model capable of generating consistent returns.

Nigam further elaborated that PhonePe is actively diversifying into new lines of business, positioning itself to “take on a larger role” within India’s dynamic digital ecosystem. He underscored that going public transcends mere financial considerations; it is, in his words, a “responsible action” that significantly bolsters the company’s credibility among regulators, investors, and its vast user base. This heightened credibility is invaluable in the highly regulated financial services sector, fostering trust and enabling smoother operations.

Funding Utilization: Fueling the Next Wave of Growth

The planned $1.5 billion capital raise from the IPO is crucial for PhonePe’s aggressive growth strategy. The funds are expected to be deployed across several key areas:

1. Scaling Financial Services: A significant portion will likely be invested in expanding the reach and depth of its insurance, mutual funds, gold, and lending businesses. This includes product development, building robust distribution networks, and investing in customer acquisition for these newer verticals.
2. Strengthening Existing Businesses: While the core payments business is mature, continuous investment is needed in technology infrastructure, cybersecurity, talent acquisition, and marketing to maintain market leadership and innovate. Enhancing fraud detection systems and ensuring seamless user experience are ongoing priorities that require significant capital.
3. Strategic Acquisitions: As discussed, M&A will be a key lever for inorganic growth, allowing PhonePe to quickly enter new segments or acquire complementary technologies and talent.

The $15 Billion Valuation Target: A Market Perspective

PhonePe’s ambitious $15 billion valuation target reflects its dominant market position, expansive user base, and future growth potential in diversified financial services. This valuation will undoubtedly be a subject of intense scrutiny from investors.

In the Indian fintech landscape, valuations are often driven by a combination of factors:

• Market Leadership & Scale: PhonePe’s substantial market share in UPI and its large active user base provide a strong foundation.
• Growth Potential in New Verticals: The diversification into insurance, mutual funds, and lending opens up new avenues for revenue generation and profitability, appealing to long-term investors.
• Revenue Models: Beyond transaction fees, PhonePe’s ability to monetize through financial product distribution and potentially lending interest will be key to justifying its valuation.
• Unit Economics & Profitability Path: With CEO Nigam’s statements on stability and profitability, investors will keenly examine its unit economics and path to sustained profitability.
• Comparable Companies: The valuation will be benchmarked against other listed Indian tech companies (e.g., Paytm, Policybazaar) and global fintech peers, though direct comparisons are often challenging given market nuances.

The current global economic climate and investor sentiment, which have become more discerning towards tech valuations, will play a significant role. However, India’s robust digital adoption narrative and the sheer scale of its market offer a compelling case for growth.

The Broader Indian Fintech Landscape and Investor Buzz

PhonePe’s IPO is poised to be one of the most closely watched tech listings in India this year, largely due to the sustained high investor interest in the fintech and digital payments space. India’s fintech sector has witnessed exponential growth, propelled by a confluence of factors:

• Digital India Initiatives: Government pushes like ‘Digital India’, Jan Dhan Yojana (financial inclusion), and the widespread adoption of Aadhaar have created a fertile ground for digital payments and financial services.
• Smartphone Penetration: The rapid increase in smartphone ownership has enabled millions to access digital financial services.
• UPI’s Success: The unparalleled success of UPI as a real-time payment system has laid the rails for a cashless economy.

This vibrant landscape has attracted significant domestic and international investment, leading to the rise of numerous successful fintech startups. The competition is fierce, with global tech giants and traditional banks also vying for a share of the burgeoning market.

Learning from Previous Listings: A Mixed Bag

The Indian public markets have seen a flurry of tech IPOs in recent years, with a mixed bag of performances. While some, like Zomato (the food delivery giant) and Nykaa (the beauty e-commerce platform), initially garnered significant investor enthusiasm, others, such as Paytm (a direct competitor in digital payments), faced challenges post-listing. These experiences have made investors more cautious and analytical, focusing heavily on fundamentals, profitability, and clear paths to sustainable growth rather than just top-line growth. PhonePe’s emphasis on profitability and diversified revenue streams, as articulated by its CEO, appears to be a direct response to these market learnings.

Flipkart’s Parallel Journey

Intriguingly, PhonePe’s IPO preparations run parallel to its former parent company, Flipkart’s own plans for a public listing later this year. As CNBC-TV18 reported earlier this year, Flipkart has also completed its Singapore-to-India domicile shift, signaling its readiness for a domestic listing as well. The simultaneous or sequential listings of these two Walmart-backed entities could create significant buzz and attract global capital into India’s tech ecosystem. The success of PhonePe’s IPO could set a positive precedent for Flipkart’s market debut.

Conclusion: A Defining Moment for Indian Fintech

PhonePe’s impending IPO is more than just a financial transaction; it represents a defining moment for the company and a significant milestone for the broader Indian fintech landscape. As one of the pioneers and leaders in India’s digital payments revolution, PhonePe’s journey to the public markets reflects the maturity and global aspirations of Indian tech unicorns. The capital raised will not only fuel PhonePe’s ambitious expansion plans into a full-suite financial services provider but also underscore investor confidence in India’s digital growth story.

The scrutiny will be intense, as will the opportunities. With its strong foundation, diversified offerings, and experienced leadership, PhonePe is poised to embark on its next phase of growth as a publicly traded entity, solidifying its role as a key architect of India’s digital financial future. Its success will serve as a beacon for many other Indian startups aspiring to list on their home exchanges, further deepening the country’s capital markets and fostering a robust ecosystem for innovation and growth.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

26th June, 2025