Is a PhonePe IPO several years away?
Walmart-backed PhonePe is one of India’s most successful fintech startups, yet nearly a decade on from its founding, the company still has no clear plans for an initial public offering (IPO). One reason for the delay may be that a giant multinational retail chain owns most of the company (85%), and is not as eager for an exit as the venture capitalists who typically back Indian startups. In June, Walmart’s executive vice president for corporate affairs, Dan Bartlett, said at the company’s annual shareholder meeting that a PhonePe IPO “is something we’re looking at over the next couple of years.”
Bartlett added, “There’s a lot of a processes that have to be put in place before we go public…Obviously the question about the Indian exchange versus others” is “under consideration” for the future IPO listing, he explained.
India’s digital payment regulations may also be impacting the PhonePe IPO. For several years now, the Reserve Bank of India (RBI) has been considering enforcing a 30% cap on the UPI (India’s main retail payments rail) market share of third-party payment providers. The RBI seems to have come up with this policy to break the de facto duopoly of Google Pay and PhonePe in the UPI retail market. Together, they have an almost 85% share of the market.
PhonePe CEO Sameer Nigam told India’s MoneyControl in late August: “The UPI market cap overhang is definitely a problem for us. I feel nervous going into the market if there’s a 30 percent market share cap lurking or booming and going and asking retail investors to put money against today’s market share of PhonePe.”
“I don’t want to go public and ask investors to buy shares without being sure that the company’s value is properly represented,” he said.
Even if Indian regulators wanted to make good on their proposed policy to restrict monthly UPI market share to 30%, they still have no smooth way to implement the policy. They cannot in good faith ask Google Pay and PhonePe to stop adding new users as it would be detrimental to the companies, Indian consumers and businesses and the broader fintech ecosystem.
One can imagine that the 30% cap will ultimately be scrapped given the difficulty of implementation and the likelihood that doing so could help pave the way for a PhonePe IPO in India. Indian regulators would prefer to see one of their most successful fintech companies go public at home rather than overseas.
