In the run-up to its $1.2-1.5 Bn public listing early next year, PhonePe is busy resolving its biggest challenge: wafer-thin margins in its core payments business and the need to build a strong bottomline and a safety net of profits.

The Walmart-owned fintech major, which commands more than 46% of the UPI market, is eyeing a listing at a $12-15 Bn valuation — a whopping 9-23x revenue multiple — in the IPO. More details will be clear when PhonePe’s IPO filing is approved after its confidential filing earlier today.

The company’s attempts at addressing the overdependence on UPI are clearly visible in its FY25 numbers. It reported a 40.4% on-year surge in revenue to INR 7,114 Cr, but the contribution from the payments business was reduced to 88.5% from 95% in FY24.

The payments biz grew nearly 23% to INR 6,299 Cr, but revenue from non-payments businesses saw the biggest increase, soaring over 200% to touch INR 600 Cr from around INR 200 Cr in FY24. This includes digital lending, payment gateway and aggregator business, insurance broking and other non-core verticals that make up the PhonePe super app experience.

The Sameer Nigam-led company’s net losses declined 13.4% in FY25 to INR 1,727.4 Cr from INR 1,996.1 Cr a year back. PhonePe’s lead in the UPI payments app space has not exactly translated into profits. It reported an EBITDA loss of INR 413.6 Cr in FY25, down 54% from FY24, even as EBITDA margin improved to -6% in FY25 from -18% the previous year.

And, that’s where the paradox lies. UPI can’t steer PhonePe towards profitability just yet. The zero merchant discount rate or MDR is one factor, but recent speedbumps for UPI and payments businesses have tempered growth rates.

A flurry of GST notices pushed vendors to turn to cash in multiple cities and stop accepting UPI. The long-term impact of this is yet to be ascertained. The other setback was the slapped a blanket ban on real-money gaming last month, driving UPI transactions down 23% and 26% in volume and value terms from July.

PhonePe, which plans to go public much ahead of its sister company Flipkart, has begun mapping out alternative revenue channels to jack up the margins.

So the crucial question is whether these revenue streams can grow fast enough for PhonePe to justify the valuation it’s looking to get from the IPO? Let’s dive in:

The UPI Engine Has Speed Limits

After years of being the champion of India’s fintech ecosystem, UPI has earned a worrisome reputation. Many fear that there’s too much dependency on the payments channel and even an MDR might not exactly change its paradoxical nature.

As per NPCI data, UPI........

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