Whalesbook
PhonePe Commences IPO Process with Offer for Sale Filing
PhonePe, a leading digital payments and financial services platform, has formally initiated its stock market listing process by filing its Updated Draft Red Herring Prospectus (UDRHP-I) with the Securities and Exchange Board of India (SEBI). This critical filing confirms that the proposed initial public offering (IPO) will be structured exclusively as an Offer for Sale (OFS). This means that PhonePe will not raise any fresh capital through the IPO; instead, all funds generated from the share sale will be distributed directly to existing shareholders seeking to exit or reduce their stakes. The estimated size of the offering is around INR 12,000 crore, with some reports suggesting an IPO size of $1.5 billion that values the company at approximately $15 billion. SEBI had previously provided confidential approval for the listing.
Key Shareholders Pursue Liquidity Event
The UDRHP-I details a significant shift in the shareholding structure as major investors aim to realize value. WM Digital Commerce Holdings, a subsidiary of Walmart, plans to offload up to 4,59,42,496 equity shares, which represents approximately 9% of PhonePe's total equity, though Walmart will retain a considerable stake. Early institutional investors, Microsoft Global Finance and Tiger Global PIP 9-1, are slated to completely exit their positions by selling their entire holdings, which together amount to approximately 47.17 lakh shares. The filing also discloses a Weighted Average Cost of Acquisition (WACA) of Rs 1,996.80 per share for all selling shareholders. This is in contrast to a recent secondary transaction in September 2025, where shares were valued at Rs 2,337.60 per share, indicating that selling shareholders are positioned to achieve realized gains. The total offering comprises around 5.06 crore equity shares.
Market Leadership and Operational Performance
PhonePe continues to solidify its dominant position in India's digital payments sector. As of September 2025, the company had maintained its leading position in UPI transaction value for 58 consecutive months, commanding a market share of 49.15% by transaction value during that period. In the first half of fiscal year 2026 (H1 FY26), the platform facilitated transactions totaling Rs 73.70 lakh crore. User engagement remains exceptionally high, with 23.77 crore monthly active customers and a strong 30-day rolling retention rate of 99.23%. The company has expanded its registered user base to over 65.75 crore.
Financially, for the fiscal year ended March 2025 (FY25), PhonePe reported a 40.50% increase in revenue from operations, reaching Rs 7,115 crore. The company recorded an adjusted EBITDA of Rs 1,477.19 crore, alongside a restated net loss of Rs 1,727.41 crore, reflecting a narrowing of losses compared to the previous fiscal year. A significant portion of the reported loss is attributed to share-based payment expenses, which amounted to Rs 2,357.86 crore in FY25. PhonePe's "New Platforms" segment, which encompasses ventures like Share.Market, incurred an adjusted EBITDA loss of Rs 454.65 crore in FY25. The company maintains a robust balance sheet, holding cash, cash equivalents, and investments totaling Rs 12,159.77 crore as of the latest reporting period.
Regulatory Considerations and Future Outlook
A notable aspect highlighted in the UDRHP-I pertains to regulatory risks, specifically the National Payments Corporation of India's (NPCI) proposed 30% cap on UPI transaction volumes for third-party applications. PhonePe's market share currently exceeds this threshold. While the implementation of this cap has been deferred until December 31, 2026, the prospectus cautions that its eventual enforcement could necessitate significant operational adjustments and growth constraints. The filing itself signifies positive movement within India's active primary market. The OFS-centric structure of the IPO underscores a strategic emphasis on providing liquidity for existing investors, while PhonePe continues to navigate its strong market position against evolving regulatory dynamics.