While the current stock market volatility stemming from the Gulf war was a factor, the pricing offered by incoming investors like mutual funds was a key issue for the company, these people said.
On Monday, the Bengaluru-headquartered firm issued a statement saying the IPO had been deferred due to volatile conditions.
“We sincerely hope for a swift return to peace in all the affected regions,” said PhonePe chief executive officer Sameer Nigam. “We remain committed to a public listing in India.”
PhonePe IPO update
Over the past two weeks, there had been doubts about the IPO as investment bankers had completed the roadshows that typically precede a share sale but no announcement about the next steps was forthcoming, said another person.
“Despite the pricing being much lower than it’s $15 billion valuation, the management was keen on going ahead with the IPO,” the person said. “But things changed when the pricing offered declined below $9-10 billion.”
A PhonePe spokesperson said, “We paused the process only because of the current market conditions which are unrelated to PhonePe. Any allusions to the pause being related to PhonePe specific issues such as valuation are baseless.”
“In the current market condition, only those listings are going ahead where the management is ready to accept a lower valuation… The question is how low can one go,” said a senior banker.
Two large payment firms are already listed on the stock markets–Paytm and Pine Labs. While Pine Labs is mostly a merchant payments company, Paytm competes with PhonePe directly in both consumer and merchant businesses.
Paytm is currently trading at a market capitalisation of around $7 billion while PineLabs is at $2 billion.
ETtech“The steep PhonePe valuation was always a point of scrutiny and with the recent regulatory interventions around rental payments and gaming there was further hit on revenue growth rates,” said the investment banker quoted above.
A recent Bernstein report noted that in the first half of the current financial year, PhonePe’s path to profitability was impacted by regulatory headwinds in FY26.
In September last year, the Reserve Bank of India banned the use of credit cards for rent payments, a large revenue line item for PhonePe and other consumer applications. Additionally, the Centre banned gaming apps, resulting in the closing of another lucrative avenue for payment processors such as PhonePe.
“The backing of Walmart is a big positive for PhonePe, so the thought process internally is that there should be no rushing into an IPO, rather the company would look for a good outcome through the listing,” said a top executive at a digital payments firm.
Also, the window for an IPO under the current set of filings had closed, said another senior banker.
“PhonePe had submitted its updated draft document on January 28 with financial details till September last year,” the person said.
Under Securities and Exchange Board of India (Sebi) rules, it would need to file a fresh set of numbers for the December quarter in order to proceed with the IPO as planned.
Additionally, excessive reliance on digital payments for revenue generation was resulting in the company reporting slower growth. PhonePe has a 45% market share of Unified Payment Interface (UPI) payments—a service that needs to be offered free of cost. In the first half of FY26, PhonePe got 82% of its revenue from payments and 12% from lending.
Also Read: PhonePe IPO: Can the fintech giant convince markets it’s about more than payments?
Esop costs
Bankers underwriting the company’s IPO also took issue with high employee stock ownership (Esop) costs, another industry executive told ET. According to a recent report by UBS, PhonePe’s Esop expenses as a share of revenue stood at 64% in the first half of FY26, compared with 2.3% for Paytm and 7.5% for Pine Labs.
While PhonePe is one of the largest consumer-facing applications in the country with 657 million registered users and 47 million registered merchants, the company has remained loss making, a metric closely tracked by public markets.
In the first six months of FY26, PhonePe reported revenue of Rs 3,918 crore and an ebitda loss of Rs 1,559 crore. A Macquarie report said that at the peak valuation of $13 billion to $15 billion, PhonePe share price would be trading at 37 to 43 times adjusted revenue, compared to 19 times for Paytm. Paytm reported similar revenue in the first half of the current fiscal but has turned profitable.