The upcoming IPO of PhonePe, with a valuation estimated between $13 and $15 billion, is emerging as a pivotal event in India’s fintech landscape, likely to create significant impacts throughout the sector—particularly for competitor Paytm, according to global brokerage Macquarie Equity Research.
In a recent report from Macquarie, it was suggested that PhonePe’s public offering might lead to a reassessment of Paytm’s value, as investors compare the two digital payment platforms’ valuations.
Currently, PhonePe holds more than a 45% share of UPI transactions as a third-party application provider, bolstered by a vast user and merchant network.
By September 2025, the platform boasted over 657 million registered users and 47 million merchants, consistently maintaining a UPI value share of around 49–51%, outpacing rivals like Google Pay and Paytm, according to the global report.
Although both companies are of similar size, their profitability metrics vary greatly. In the first half of FY26, PhonePe’s revenue reached ₹3,918 crore, which is nearly equal to Paytm’s ₹3,981 crore.
Nevertheless, Paytm achieved a positive EBITDA of ₹216 crore, in contrast to PhonePe’s EBITDA loss of ₹1,559 crore, primarily attributable to substantial employee stock option (ESOP) expenses. PhonePe’s ESOP costs amounted to ₹1,813 crore—approximately 46% of its revenue—compared to around 2% for Paytm, according to Macquarie.
Valuation Comparison
According to the global brokerage firm, the differences are further emphasized by valuation comparisons. Following its latest funding round with General Atlantic in September 2025, PhonePe’s implied valuation stood at around $13 billion, although reports indicate it may reach close to $15 billion at the time of listing.
At these valuations, Macquarie anticipates that PhonePe would trade at 37–43 times adjusted first-half revenues, in contrast to approximately 19 times for Paytm. Even based on FY25 projections, PhonePe’s revenue multiple of 16.6–19.1 times remains higher than Paytm’s 10.5 times, suggesting there could be a potential for a near-term valuation adjustment in Paytm if investors synchronize their valuations.
Competitive Dynamics
PhonePe’s distribution of financial services (including lending, mutual funds, and insurance) has increased from 4% of FY24 revenue to 13% in the first half of FY26, challenging Paytm’s primary business where it accounts for approximately 33%. This heightens competition and exerts pressure on margins, according to Macquarie.
Regulatory Risks
Approximately 20% of PhonePe’s revenue for the first half of FY26 comes from restricted categories such as credit card rent payments, real-money gaming, and PIDF incentives, which was 24% in FY25. The exposure to UPI incentives is comparatively minor. The NPCI’s suggested cap of 30% on UPI market share (extended to December 2026) is significant, especially considering PhonePe’s 46% market share, which could limit user growth and transaction volumes. The scrutiny of digital gold sales also poses a risk to monetization efforts, according to the global brokerage.
Macquarie Outlook
Macquarie holds a Neutral outlook on Paytm, setting a 12-month target price of ₹1,265, highlighting potential benefits from growth in loan distribution while also warning about risks concerning asset quality and the competitive landscape in the fintech sector.
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