Re-rating Likely After PhonePe IPO
Mumbai: IPO-bound PhonePe draws attention from analysts’ comparisons with listed peer One 97 Communications, which owns Paytm. Despite arriving nearly five years later, PhonePe has grown rapidly and benefited from a slowdown when Paytm came under regulatory scrutiny, which constrained its growth.
Founded in Bengaluru in December 2015 by former Flipkart executives and later acquired by Flipkart, which was itself acquired by US retail giant Walmart, PhonePe now competes directly with Paytm, which was founded in 2010.
Paytm rose to prominence during the demonetization wave of November-December 2016 and emerged as one of India’s top cashless payment solutions. Today, both PhonePe and Paytm compete in the online financial product distribution market as well as consumer and merchant payment solutions.
PhonePe is rapidly narrowing the revenue and earnings gap between the two companies. While Paytm currently leads in merchant payment revenues, PhonePe still needs to expand its merchant customer base to compete effectively. PhonePe’s larger consumer payment base has not translated into proportionate revenue gains.
PhonePe and Paytm’s H1FY26 merchant payment revenues stood at Rs 9.9 billion and Rs 20.2 billion respectively. According to Emkay Global Financial Services, PhonePe’s consumer payment revenue is 2.5 times that of Paytm, but Paytm generates 34 percent more revenue per consumer.
“PhonePe has a much larger consumer franchise, with nearly three times the active consumer base and almost nine times the scale of Paytm in consumer total payments value (TPV). On the merchant side, while their registered merchant bases are comparable, Paytm retains its advantage with its larger installed payment device base and marginally higher merchant TPV. In addition, Paytm is significantly ahead in lending among both consumers and merchants, with payments around 2.5-3 times that of PhonePe.” Bernstein’s pre-IPO research report.
“While Paytm is running around breakeven, PhonePe is still loss-making at the PBT (profit before tax) level. The fixed cost bases of the two companies are comparable, but PhonePe’s large ESOP expense (roughly around 40 per cent of revenue) widens the difference in profitability at the PBT level,” Bernstein analysts added.
PhonePe’s entry into the equity market through its Share.Market app is similar to Paytm’s entry through Paytm Money.
“While Paytm has the early mover advantage, we believe PhonePe’s large organic consumer base will enable it to grow aggressively. However, digital-first players like Zerodha and Groww are already well established and it will be difficult to woo customers away from these platforms,” Emkay Global said.
“PhonePe has grown its distribution business significantly over the last 12 months, which has implications for Paytm’s business. However, PhonePe is also facing challenges due to loss of revenue due to recent regulatory changes, including the Reserve Bank of India’s suspension of lease payments via credit cards, restrictions on real money gaming and the reduction of incentives under the Payments Infrastructure Development Fund (PIDF),” Macquarie Equity Research said in a recent pre-IPO review.
“PhonePe’s latest valuation, based on its last transaction with General Atlantic in September 2025 and media reports, is around US$13-15 billion, although its EBITDA is negative – around 60-90 per cent higher than Paytm – while Paytm is EBITDA positive,” Macquarie added.
On Friday, shares of One 97 Communications closed 1.23 percent lower at Rs 1,040, taking its market capitalization to around Rs 66,250 billion (about US$ 7 billion), with all key data retained.
