Walmart-backed Indian fintech firm PhonePe is planning to list at a valuation of $9 billion to $10.5 billion, Reuters reported, citing two people with direct knowledge of the matter.
This indicates the IPO will generate approximately $900 million to $1.05 billion. However, even at the higher estimate, the deal reflects a lower valuation compared to the $12 billion valuation at which PhonePe last raised $100 million in private markets in 2023, it said.
Walmart to trim its stake
Walmart will reduce its stake in PhonePe by around 12% during the firm’s initial public offering, while Tiger Global and Microsoft plan to divest their holdings, the report said, citing the firm’s IPO filing.
The three companies plan to sell approximately 50.7 million shares in the offering, while PhonePe will not issue any additional shares.
Livemint could not independently verify the report.
PhonePe IPO
PhonePe, a competitor to Google Pay and Paytm in India, filed for IPO in September and plans to conclude the process by April. However, this timeline might change based on capital market conditions, including potential effects from the Middle East conflict.
PhonePe’s listing would rank as India’s second-largest fintech IPO, after Paytm’s approximately $20 billion listing in 2021.
Paytm is currently valued at a market capitalisation of $7.1 billion.
PhonePe has over 650 million registered users and handled nearly 10 billion of the 21.7 billion transactions on India’s unified payments interface (UPI) in January, the report said, citing regulatory data. However, payments in India remain a low-margin business, it added.
India introduced UPI in 2016 and prohibited companies from charging fees for the instant payment service to encourage digital payments and decrease cash usage in Asia’s third-largest economy.
Key financials
PhonePe’s losses increased to 14.44 billion rupees ($158 million) in the six months ending 30 September, up from 12.03 billion rupees a year earlier, while revenue grew approximately 22% to 39.18 billion rupees, according to the firm’s IPO filing.
Two portfolio managers, who attended the company’s management meetings during pre-IPO roadshows, mentioned that enthusiasm for the country’s fintech sector has waned. They also expressed ongoing concerns about PhonePe’s capability to monetise its user base, which is a significant factor that might prevent it from reaching a valuation similar to its most recent funding round.
“Monetisation remains a question mark. Active users aren’t growing at the same pace, so the game is all about upsell, and that remains to be seen,” one of the portfolio managers told the news portal.
Another person aware of the development, a banker involved in the issue, told the news agency that investors also view India’s fintech market as overcrowded and lacking significant differentiation among the players.
