Digital payments major PhonePe has filed its draft red herring prospectus (DRHP) to raise capital from the primary markets. While the PhonePe IPO timeline, issue size and other key details are yet to be disclosed, market participants have begun drawing comparisons with its listed peer Paytm, which debuted on the bourses in November 2021.
According to PhonePe IPO DRHP, the company reported 238 million monthly active customers (MACs), each transacting an average of 37 times per month. However, this scale of engagement has not yet translated proportionately into revenue. In H1FY26, PhonePe and Paytm reported broadly similar revenue, underscoring the monetisation challenge.
PhonePe has increasingly pivoted towards merchant-led monetisation and loan distribution to drive growth. Notably, around 18% of its H1FY26 revenue came from Real Money Gaming (RMG), rent payments and PIDF incentives — business streams that are set to be discontinued. Excluding these segments, PhonePe’s H1FY26 revenue was 17.6% lower than that of Paytm.
PhonePe vs Paytm: Who offers more risk-reward?
Media reports suggest PhonePe is seeking a valuation of $13 billion, implying 18.7x H1FY26 annualised revenue (excluding discontinued businesses), compared with Paytm’s 9.8x multiple.
Given the relatively weaker profitability profile and premium valuation, Emkay Global Financial Services believes Paytm offers a more favourable risk-reward. The brokerage has maintained a ‘Buy’ rating on Paytm shares. It has a Paytm share price of ₹1,500 apiece, implying an upside potential of more than 32% from Tuesday’s closing level.
Despite commanding over 301 million monthly active users (MAUs), maintaining a consistent 45%+ UPI market share, and processing UPI total payment value (TPV) of ₹148 lakh crore in CY25, PhonePe’s revenue per MAU stands at ₹21.4 — among the lowest across Indian consumer internet platforms. In H1FY26, consumer-led revenues contributed 61.9% to PhonePe’s topline, compared with 23.6% for Paytm.
Merchant Revenue Contribution
PhonePe has accelerated its focus on merchants as it faces monetisation constraints on the consumer side. Merchant revenue contribution rose to 38.1% in H1FY26 from 14.7% in FY23. In contrast, Paytm’s merchant business, supported by a more mature POS and payment aggregation/payment gateway (PA/PG) ecosystem, accounted for 76.4% of its H1FY26 revenue.
At the start of the decade, PhonePe had prioritised insurance distribution to monetise its user base, reportedly investing around ₹1,000 crore. Meanwhile, Paytm focused on loan distribution, which scaled meaningfully over time. Insurance distribution proved more complex to scale, prompting PhonePe over the past two years to pivot aggressively toward loan distribution.
This segment contributed an estimated 9% to H1FY26 revenue, compared to negligible contribution in FY23, and has grown at over 100% annually, making it a key growth driver.
Cost Structure
Profitability remains a key differentiator. While PhonePe’s H1FY26 EBITDA before ESOP expenses stood at ₹2.5 billion—close to Paytm’s ₹2.8 billion—higher ESOP costs ( ₹18.1 billion versus ₹650 million for Paytm) and depreciation and amortisation ( ₹5.7 billion versus ₹3.0 billion) resulted in a significantly wider EBIT loss of ₹21.2 billion, compared with Paytm’s ₹900 million loss.
Emkay attributes PhonePe’s higher capital expenditure — ₹35.8 billion over FY23-25 versus Paytm’s ₹18.5 billion — to investments in data centres. However, the brokerage notes that these investments have yet to deliver meaningful operating leverage, and elevated D&A expenses are likely to persist given legacy capex and an ESOP-heavy compensation structure.
Paytm Share Price Performance
While investors keenly await the PhonePe IPO, its rival One97 Communications Ltd, the parent company of Paytm, had made a weak debut in the Indian stock market on November 18, 2021. Paytm shares were listed at a significant discount, opening at ₹1,950 and ₹1,955 per share on the NSE and BSE — roughly 9% below its issue price of ₹2,150 per share.
However, Paytm shares plunged over 27% on the first day, closing around ₹1,560 – ₹1,564, making it one of the weakest major debuts in Indian stock market history.
Paytm shares have failed to reclaim their IPO price since listing. The stock still trades nearly 48% below its issue price. Paytm share price has fallen 12% in six months, but has rallied 53% in one year. The stock has delivered multibagger returns of 176% over the past two years.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
