India’s largest digital payments platform PhonePe is heading toward the public markets at a time when several of its key early investors are preparing to exit, raising concerns over the company’s long-term capital support and financial sustainability.
According to a research note by Khandwala Securities, the proposed IPO is structured entirely as an Offer for Sale (OFS), allowing existing shareholders to sell their stake without bringing any fresh capital into the company. Among those expected to significantly reduce or exit their holdings are global investors such as Microsoft and Tiger Global Management, while parent company Walmart is also reportedly planning to divest part of its stake.
The absence of fresh funds means the company will not receive any capital from the IPO to finance expansion, strengthen its balance sheet, or offset ongoing losses. Analysts say this could leave the fintech platform under pressure to fund its operational and growth requirements even as existing investors head for the exit.
“The structure effectively makes the IPO an investor liquidity event rather than a capital-raising exercise for the company,” the report notes, highlighting potential concerns about future funding needs.
The timing is significant because PhonePe continues to operate at a loss despite rapid revenue growth. In the first half of FY26, the company’s net loss widened by more than 20% year-on-year, while EBITDA losses nearly doubled as spending on customer acquisition, technology infrastructure and incentives remained elevated.
The company’s core payments business is built around India’s UPI ecosystem managed by the National Payments Corporation of India, which accounts for more than 90% of its transaction volumes. While the platform currently commands nearly half of UPI transactions, regulatory proposals such as a 30% market-share cap could limit future growth potential.
At the same time, diversification into lending, insurance and investment products is still in its early stages and has yet to demonstrate meaningful profitability.
Analysts also point to valuation concerns. Based on recent secondary transactions, PhonePe is valued at roughly ₹1.18 trillion, translating to a price-to-book multiple of over 12 times—far higher than that of rival Paytm, which trades at a significantly lower multiple despite already being listed.
The company has filed the IPO under provisions of the Securities and Exchange Board of India that allow firms without sustained profitability to go public, which could also add volatility to the listing.
Taken together, analysts warn that the combination of investor exits, lack of fresh capital infusion, persistent losses and regulatory uncertainties could make the IPO a high-risk proposition for public market investors.
With early backers heading for the door and no new funds entering the company through the offering, the bigger question for the fintech giant may not just be valuation—but how it plans to sustain capital requirements in the years ahead.
Supporting these concerns, a recent note from Bernstein Research observed that while PhonePe has achieved strong scale in digital payments, profitability remains elusive with the company still reporting losses at the profit-before-tax level, while regulatory changes have already affected certain revenue streams.
Similarly, analysts at Macquarie Group have cautioned that India’s zero-MDR regime makes it inherently difficult for payment platforms to monetise UPI transactions, forcing companies to rely on incentives and marketing spends that delay operating leverage.