PhonePe cuts losses by 28% in FY2024
Walmart-backed PhonePe is one of India’s most prominent fintech startups, perhaps the best known after Paytm. With the backing of the retail chain juggernaut, which owns 85% of the company, PhonePe does not seem to face the same kind of pressure for an exit as startups dependent on venture capitalists. That means PhonePe can afford to wait until its financials are in good shape before going public. And in the 2024 fiscal year, PhonePe made important progress in that direction: Its losses were trimmed 28% to 20 billion rupees while revenue from operations surged 74% to 50.6 billion rupees.
In many respects, PhonePe is doing the right things as it prepares for an eventual IPO.
The company has fought its way to the top of the subcontinent’s massive UPI payments rail, edging out Google Pay and Paytm with a 50% market share, is gradually building out a comprehensive digital financial services ecosystem and continues to raise eyewatering sums from investors at a time when the easy money no longer flows.
The company could achieve operational profit by 2025. That is the prediction made by CEO and founder Sameer Nigam, who also expects PhonePe’s payment, advertising, banking and insurance units to break even by that time. Nigam has emphasized that PhonePe is not spending too heavily on marketing to promote its products, helping to control cash burn.
While there has been speculation about a PhonePe IPO for several years, the company has declined to make the commitment to go public. While there are important financial considerations, PhonePe is also likely concerned about the regulatory environment. Indeed, the Reserve Bank of India (RBI) has vowed to impose a 30% cap on the UPI 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.
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.
