Walmart-backed PhonePe eyes $10.5 billion valuation for India IPO, sources reveal

• PhonePe processed nearly half (10 billion of 21.7 billion) of India's UPI transactions in January with 650+ million users, but losses widened to $158 million in six months ending September 2024
• The IPO is expected by April 2025 and would be India's second-largest fintech listing after Paytm's $20 billion 2021 IPO (now valued at $7.1 billion)
• Investor concerns center on monetization challenges in India's low-margin, fee-free UPI payments market and an overcrowded fintech sector with limited differentiation

Summary

PhonePe IPO Details:

Walmart-backed Indian fintech PhonePe is targeting a valuation of $9-10.5 billion for its upcoming India IPO, expected to raise $900 million to $1.05 billion. The valuation represents a significant markdown from its $12 billion private market valuation in 2023 when it raised $100 million. The company filed for IPO in September and aims to complete the listing by April, though timing depends on market conditions.

Shareholder Changes:

Walmart will reduce its stake by approximately 12%, while existing investors Tiger Global and Microsoft plan to exit completely, selling around 50.7 million shares combined.

Market Position:

PhonePe dominates India's digital payments landscape with over 650 million registered users and processed nearly 10 billion of 21.7 billion transactions on India's Unified Payments Interface (UPI) in January—capturing almost half the market. The platform competes with Google Pay and Paytm.

Financial Performance:

For the six months ending September 30, PhonePe reported losses widening to 14.44 billion rupees ($158 million) from 12.03 billion rupees year-over-year, while revenue grew 22% to 39.18 billion rupees. The low-margin nature of India's payments business, where UPI transactions are fee-free by regulation, poses profitability challenges.

Market Concerns:

Investor enthusiasm has cooled due to monetization concerns and limited user growth. Portfolio managers cite questions about PhonePe's ability to convert its massive user base into profits through upselling. The overcrowded fintech market with minimal differentiation among players adds to valuation pressures. If successful, this would be India's second-largest fintech IPO after Paytm's $20 billion listing in 2021.