Proposed UPI Market Cap Rule Hindering PhonePe’s IPO Plans, Says CEO Sameer Nigam

Fintech major PhonePe’s founder and CEO Sameer Nigam has said that the National Payment Corporation of India’s (NPCI) plan to cap the UPI market share of third-party app providers (TPAPs) is preventing the startup from going ahead with its initial public offering (IPO).

Speaking at the Global Fintech Fest (GFF) on Wednesday (August 28), Nigam said, “I feel nervous going into the market if there’s a 30% market cap lurking or looming and I am asking retail investors to put money against today’s market cap.”

He was responding to questions on the company’s IPO plans, given that a Walmart executive recently said that the company might prioritise PhonePe IPO ahead of Flipkart.

It is pertinent to note that the NPCI proposed a 30% market cap limit for TPAPs in November 2020. While the policy had an original deadline of December 31, 2022, it was extended to December 2024. The NPCI is expected to announce a final decision by the end of 2024.

Talking further about the IPO, Nigam said, “The least of my concerns is raising money. My concern is whether we do right by our shareholders.” 

He said PhonePe has always taken pride in providing “considerable” return on capital to shareholders. The startup was able to do this because it has taken a “slow and sure path to durable success”. 

“I don’t want to go public based on today’s numbers and market share until I can look you in the eye and say… my shares and the company is going to be able to grow from here,” Nigam added.

PhonePe is one of the leading payments players in the UPI segment. In July this year, it held a 48.3% market share in the UPI ecosystem, registering 6.98 Bn transactions worth INR 10.28 Lakh Cr.

Last week, it launched a new feature, ‘Credit Line on UPI’, allowing consumers to link credit lines from their banks directly to UPI on the platform.

While the regulatory changes are a concern, Nigam also pointed out that achieving profitability is the first milestone for the company. It is also looking to diversify its offerings. 

Earlier this week, the fintech major said it turned profitable before ESOP costs during the financial year ended March 31, 2024. It claimed to have posted an adjusted profit after tax (PAT) of INR 197 Cr in FY24 as against an adjusted loss after tax of INR 738 Cr in the previous fiscal year. 

PhonePe said its revenue also surged 74% YoY to INR 5,064 Cr in FY24.

Nigam also said that the company has focused on regulatory compliance from the very beginning. Over the last few years, PhonePe built a total of five data centres to ensure that all its servers are active 24 hours every day.

Meanwhile, the startup is looking to expand its global footprint. PhonePe CEO said that the startup has already expanded to the Middle East and Singapore. The company will also have a presence in Europe within the next five years, he added.

PhonePe, which has launched a number of new offerings over the last few years, including insurance, lending, stock broking app Share.Market, hyperlocal ecommerce app Pincode and Indus App Store, also announced the launch of PhonePe PG Bolt to enable in-app payments for merchants.

PhonePe PG Bolt offers a 1-second transaction time with the widest reach for registered PhonePe merchants and users who can integrate their payments across apps without multiple onboarding, the company said.