PhonePe IPO Coming Soon: DRHP Filed
Lets understand the business and the risks
The Shadowfax IPO disappointed the investors as the stock was listed at a discount today (28 January) - However, not a surprise. Based on my previous year's experience, the IPO season will dry out now, given that we are coming close to the financial year.
However, many exciting IPOs are lined up for the next financial year - Reliance Jio being the biggest name. Today, let's cover PhonePe - the company filed the DRHP last week.
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PhonePe IPO: What I Took Away After Reading the DRHP
I spent time going through PhonePe’s Draft Red Herring Prospectus, and honestly, this is one of the more interesting fintech filings we have seen from India. Not because PhonePe is new to us, but because the DRHP finally puts numbers, structure, and risks behind a product most of us use daily.
Here’s how I look at the business, its growth levers, the risks that matter, and the financial story behind it.
The Business: More Than Just UPI
Most people still think of PhonePe as a UPI app. That’s outdated.
PhonePe today is a multi-platform fintech ecosystem, built around three core pillars:
Payments Platform (the core engine)
This includes consumer UPI payments, merchant payments, payment gateway, QR devices, billing integrations, and POS solutions.
PhonePe has maintained leadership in UPI transactions and total payment value for years. Payments may look low-margin, but they act as the distribution rail for everything else.Digital Distribution Services
This is where monetisation really starts showing up:Insurance distribution
Mutual funds and stock broking via Share.Market
Bill payments, wealth products, and other financial services
PhonePe is using its massive user base to distribute third-party financial products, earning commissions and fees.
New Platforms: Share.Market and Indus Appstore
Share.Market positions PhonePe in the broking and investments space.
Indus Appstore is a Made-in-India Android app store, which could become strategic if India pushes harder on digital sovereignty.
The key insight here: UPI is the entry point, not the business model. PhonePe is using payments to build habit, frequency, and trust, and then monetising that relationship elsewhere.
Growth Potential: Why PhonePe Still Has a Long Runway
Even with its current scale, PhonePe is far from done.
1. Monetisation is still early
India’s digital payments market exploded before monetisation did. PhonePe is now gradually layering:
Insurance commissions
Lending distribution fees
Broking and wealth revenue
Merchant solutions and value-added services
As user behaviour matures, ARPU expansion is a real lever.
2. Financial services penetration in India is low
Insurance, credit, and investments are still under-penetrated. PhonePe sits at the intersection of data, distribution, and daily usage, which gives it a structural advantage in cross-selling.
3. Merchant ecosystem is getting deeper
The PhonePe Business app is no longer just about QR payments. It now includes:
Settlements and reconciliation
Credit access via lending partners
Billing and POS integrations
This increases merchant stickiness and opens higher-margin revenue pools.
4. Optionality from new platforms
Share.Market and Indus Appstore may not contribute meaningfully today, but they add long-term optionality. Investors are effectively getting these bets embedded into the core business.
The Financials: Loss-Making, But the Direction Matters
This is where the DRHP gets interesting.
Revenue growth is strong
Revenue from operations grew from Rs 2,914 crore in FY23 to Rs 7,114 crore in FY25
Growth was 74% between FY23 and FY24, and 40% een FY24 and FY25
This is not cosmetic growth. It reflects real monetisation kicking in.
Losses are shrinking fast
FY23 loss margin was close to minus 96%
FY25 loss margin improved to around minus 23%
That’s a massive operating leverage story playing out.
Cash flows have turned positive
Operating cash flow turned positive in FY25 at about Rs 1202 crore
Free cash flow was also positive
This is important. Many tech IPOs came with losses and negative cash flows. PhonePe now has losses on the P&L, but cash discipline is improving materially.
Adjusted profitability already visible
On an adjusted basis:
Adjusted EBITDA margin at the group level is over 20%
The core PhonePe platform shows even higher margins
This tells me the core business is already profitable, and reported losses are largely due to investments in newer platforms and expansion.
Top 4 Risks That Actually Matter
Every DRHP has dozens of risks. These are the four I think investors should actually focus on.
1. Regulatory dependence
PhonePe operates under RBI, NPCI, SEBI, and IRDAI frameworks. Any adverse change in UPI pricing, data rules, or licensing norms can impact growth or costs. Payments is not a free-market business. Regulation will always be a swing factor.
2. Cybersecurity and data risk
PhonePe handles sensitive financial and personal data at population scale. A major breach would not just be a one-time cost, but a trust issue. At this scale, even small failures can become systemic events.
3. Competitive pressure
UPI is fiercely competitive. While PhonePe leads today, pricing power is limited, and innovation cycles are fast. Sustaining leadership requires continuous investment.
4. History of losses
Yes, losses are narrowing, and cash flows are improving. But the company still has a long history of losses. If growth slows or costs spike, profitability timelines can stretch.
My Closing Take
PhonePe is not a “payments company going public.”
It is a financial distribution platform built on top of payments, with improving unit economics and visible operating leverage.
The biggest positive for me is not the scale, but the direction of financials. Revenue growth is strong, losses are shrinking fast, and cash flows have turned positive. That combination is rare among consumer tech IPOs.
The risks are real, especially regulation and competition, but this is one of the few fintech stories where scale, data, and monetisation are coming together at the same time.
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