PhonePe narrows losses and goes confidential for $1.5bn IPO — Will investors back Walmart’s fintech bet?

In a move that cements its position as one of India’s most closely watched fintech unicorns, PhonePe, majority-owned by Walmart Inc. (NYSE: WMT), has disclosed narrowed losses in fiscal 2025 while simultaneously filing confidential papers for a landmark initial public offering (IPO) in India. The dual development underscores the company’s bid to transition from a privately funded growth story into a listed fintech major, at a time when global investors are scrutinizing profitability in digital finance.

Why are PhonePe’s shrinking losses being closely watched ahead of its IPO filing?

PhonePe reported a net loss of around ₹1,720–1,727 crore in FY25, a reduction of nearly 13–14 percent from ₹1,996 crore in FY24. Revenue from operations rose sharply by 40 percent year-on-year to approximately ₹7,115 crore, reflecting stronger adoption of payment services and early monetization of its emerging businesses in insurance, credit, and wealth management. Importantly, the company is also said to have turned free cash flow positive, generating over ₹1,200 crore from operations — a milestone that gives it breathing space in a sector notorious for cash burn.

The narrowing of losses is not just an accounting improvement; it signals to potential IPO investors that PhonePe is actively moving away from dependence on private equity funding toward a self-sustaining model. Analysts note that the company’s operational efficiency is improving even as volumes scale, giving it a stronger pitch to retail and institutional buyers who often demand clearer profitability roadmaps from tech IPOs.

How significant is PhonePe’s confidential IPO filing in India’s capital markets?

The company has filed its Draft Red Herring Prospectus (DRHP) via the confidential route with the Securities and Exchange Board of India (SEBI), aiming to raise between ₹12,000 crore and ₹13,000 crore (approximately $1.3–1.5 billion). This fundraising could value PhonePe at nearly $15 billion, up from its last private market valuation of about $12 billion in 2023.

Investment banks including Kotak Mahindra Capital, JPMorgan, Morgan Stanley, and Citi are reportedly advising on the transaction. The IPO is expected to include both a fresh issue and an offer for sale (OFS), giving existing investors such as Walmart, Microsoft, and Tiger Global an opportunity to partially monetize holdings.

The confidential route gives PhonePe the flexibility to tweak or delay its offering depending on market appetite, regulatory review, and sector sentiment. Given that India has recently witnessed mixed outcomes for fintech IPOs — with Paytm’s volatile post-listing performance still fresh in investors’ minds — this cautious approach appears designed to maximize valuation while reducing execution risk.

What role does Walmart play in PhonePe’s strategy and IPO readiness?

Walmart Inc., which acquired a controlling stake in PhonePe after purchasing Flipkart in 2018, has been instrumental in shaping the fintech’s long-term strategy. For Walmart, PhonePe is both a payments gateway into India’s booming digital economy and a potential standalone value creator.

By helping PhonePe scale merchant networks, secure regulatory approvals, and build compliance capabilities, Walmart has provided not just capital but operational credibility. Investors view Walmart’s continued support as a stabilizing factor, especially given its experience in navigating large-scale retail and digital transitions globally.

In the broader context, Walmart’s PhonePe stake offers it a strategic counterweight to Amazon Pay and Reliance Jio Financial Services in India, deepening Walmart’s footprint in a country where e-commerce, fintech, and retail are converging at unprecedented speed.

How does PhonePe compare with India’s other fintech giants like Paytm and Google Pay?

PhonePe commands a dominant market share in India’s Unified Payments Interface (UPI) ecosystem, handling more than 45 percent of UPI volumes and processing over 310 million transactions daily. It boasts over 600 million registered users and connects more than 40 million merchants, making it arguably India’s largest payments platform by scale.

By contrast, Paytm (NSE: PAYTM) has diversified aggressively into lending and wealth services but has struggled with regulatory scrutiny and profitability concerns. Google Pay remains a significant competitor in transaction volumes but lacks a broad revenue diversification strategy in India.

The Reserve Bank of India (RBI) has also delayed the enforcement of a proposed 30 percent market share cap on UPI until December 2026, giving PhonePe breathing room to maintain its dominance. This extension is considered a major relief to both PhonePe and Google Pay, which together control the lion’s share of India’s digital payments ecosystem.

What risks and challenges could cloud PhonePe’s IPO success?

Despite narrowing losses, the path to profitability remains uncertain. Expanding into credit and insurance requires heavy upfront investment and exposes the company to default cycles and provisioning costs. Regulatory overhangs — from potential UPI transaction caps to stricter digital lending rules — could also weigh on the growth trajectory.

Investors will be cautious after Paytm’s turbulent listing in 2021, which saw its valuation collapse by over 60 percent in the first year post-IPO. Any misalignment between PhonePe’s valuation expectations and investor sentiment could result in subdued demand or a valuation haircut.

Global macroeconomic conditions — such as rising interest rates, risk-off investor sentiment, or a slowdown in tech IPO flows — could further complicate timing. Analysts believe PhonePe will need to strike a careful balance between projecting strong growth and reassuring investors about sustainable margins.

How is investor and institutional sentiment shaping up around PhonePe’s IPO?

Early indications suggest that institutional investors are cautiously optimistic. PhonePe’s scale, Walmart’s backing, and India’s long-term digital finance growth story are attractive drivers. However, fund managers remain wary of high valuations relative to profitability, particularly given the shadow of Paytm’s IPO.

Indian mutual funds and domestic institutional investors (DIIs) are expected to participate meaningfully, while foreign institutional investors (FIIs) may weigh macro factors more heavily. In the secondary market, sentiment toward Indian fintech has improved following regulatory clarity and strong adoption metrics, but buy-side desks are expected to demand a reasonable discount to the aspirational $15 billion valuation.

For Walmart itself, the IPO offers partial liquidity while retaining a controlling stake, and market observers see this as a disciplined move to unlock value rather than a full exit.

What does PhonePe’s IPO mean for India’s fintech sector and capital markets?

If successful, PhonePe’s IPO could become a bellwether for India’s fintech listings, restoring confidence after Paytm’s rocky journey and setting benchmarks for valuation, governance, and profitability. It could also accelerate IPO pipelines for other fintech players like Pine Labs, MobiKwik, and Cred, who have delayed listings due to market volatility.

At the sectoral level, PhonePe’s listing will highlight the evolution of India’s digital finance ecosystem from a hyper-growth, cash-burn phase to a more mature, revenue-diverse stage. For capital markets, it represents another milestone in India’s ongoing transformation into a preferred listing venue for homegrown tech leaders, at a time when global liquidity is uneven and investors are actively seeking growth stories outside the U.S. and China.

Is this the right time for PhonePe to go public?

Industry analysts suggest that PhonePe’s timing is pragmatic. The company has narrowed losses, turned cash flow positive, and built a strong moat in payments. These are precisely the elements that public investors have been demanding from Indian tech companies after the Paytm episode.

However, the challenge will be maintaining this trajectory post-IPO, when quarterly earnings scrutiny intensifies. As one fund manager remarked indirectly, public markets reward execution over narrative. The pressure to deliver consistent revenue growth, contain credit risks, and sustain margins will only rise once PhonePe is listed.

For Walmart, the IPO offers dual benefits — a liquidity event for shareholders and the chance to showcase India as a growth engine in its global strategy. For the Indian fintech ecosystem, the listing represents a litmus test of how global and domestic investors now perceive the sector.

How will PhonePe balance profitability, regulation, and competition in shaping its road ahead after narrowing FY25 losses?

PhonePe’s IPO is not just about raising capital; it is about signaling maturity in one of the world’s fastest-growing fintech markets. Its ability to narrow losses while scaling aggressively offers a credible path to profitability, but the sustainability of this trend will be closely scrutinized.

With a $15 billion valuation target, the fintech has much to prove. Investors will judge not only its market dominance but also its ability to diversify successfully into lending, insurance, and wealth management. Regulatory developments will remain a wildcard.

If PhonePe can deliver consistent operating profits post-IPO, it could redefine investor confidence in Indian fintech and position itself as a global case study in scaling digital payments into a full-stack financial services powerhouse. But if growth slows or margins slip, it risks being viewed as another overhyped tech listing.