PhonePe Plans Major IPO Amid Financial Challenges
PhonePe, India's premier digital payments platform, is set to launch a significant initial public offering (IPO) aiming to raise between Rs 12,000 and 13,000 crore. This ambitious move is being driven by Walmart, which currently controls PhonePe and plans to sell a considerable portion of its stake. The IPO is expected to be the second-largest in India's fintech sector, following Paytm's previous offering.
As the largest digital payments service in India, PhonePe has a market share of 46.85% in Unified Payments Interface (UPI) transactions, according to the National Payments Corporation of India (NPCI). However, despite its leading position, the company has been grappling with financial difficulties, reporting substantial net losses over the past several years.
Walmart's WM Digital Commerce Holdings will be the primary seller in this offer-for-sale (OFS), planning to offload 4.59 crore shares, which amounts to 9.06% of PhonePe's total paid-up equity. Other stakeholders, including Tiger Global and Microsoft, will also sell their shares in the offering. Interestingly, while the selling shareholders will benefit from the proceeds, PhonePe itself will not receive any funds from this IPO.
Looking at its financial history, PhonePe has reported net losses of Rs 1,444.42 crore, Rs 1,203.21 crore, and more in the fiscal years leading up to 2025. These figures indicate a trend of negative cash flows from operating activities, raising concerns about the company's sustainability and future growth prospects.
The timing of PhonePe's IPO is crucial, as it enters a volatile market characterized by geopolitical tensions and economic uncertainties. Despite these challenges, the Indian IPO pipeline remains robust, with numerous companies across various sectors preparing to go public. Analysts estimate around Rs 2.65 lakh crore in total fundraising is anticipated.
With about 202 companies currently in line for IPOs, the technology sector has shown a notable interest among investors. While only seven of these firms are new-age technology companies, they are collectively seeking around Rs 22,500 crore, demonstrating the ongoing investor enthusiasm for scalable tech firms.
As PhonePe prepares for its IPO amidst these financial and market dynamics, it symbolizes not just its own journey but also the broader evolution of India's fintech landscape, which is ripe for innovation and growth.
