As PhonePe prepares for its initial public offering, the updated draft red herring prospectus (DRHP) highlights the impact of regulatory constraints and heavy dependence on payments-linked revenue, even as Unified Payments Interface (UPI) transactions continue under a zero merchant discount rate (MDR) regime.
The proposed IPO comprises an offer for sale of 50.6 million equity shares. Promoter WM Digital Commerce Holdings, owned by Walmart International Holdings, plans to sell 45.94 million shares, while Tiger Global and Microsoft will offload 1.039 million and 3.678 million shares, respectively. Media reports suggest the company is targeting a valuation of about $15 billion with an IPO size of around $1.5 billion.
The Bengaluru-based fintech reported a consolidated loss of ₹1,444.42 crore in the first half of FY26, higher than the ₹1,203.2 crore loss recorded in the same period last year. However, annual losses have narrowed over time, declining from ₹2,796 crore in FY23 to ₹1,727.4 crore in FY25.
Revenue from operations rose to ₹3,918.4 crore in H1FY26 from ₹3,207.5 crore a year earlier. Payments services accounted for 82.5 per cent, or ₹3,231.7 crore, of operating revenue during the period, down from over 91 per cent in H1FY25.
PhonePe controls more than 45 per cent of monthly UPI transaction volumes, but the absence of MDR limits revenue generation from these transactions. The company also receives government incentives for promoting low-value UPI payments, though these incentives have declined over the years.
Earlier, PhonePe founder and CEO Sameer Nigam had flagged concerns over the zero-MDR framework, stating that it discourages investment and leaves limited scope for a sustainable business model in digital payments.