PhonePe: From a Flipkart Side Project to India’s Largest Payments Platform and a $14.5 Billion IPO

Three Engineers, Two Decades of Friendship

PhonePe was founded in December 2015 by Sameer Nigam, Rahul Chari, and Burzin Engineer. The three co-founders have known each other for close to two decades. Sameer Nigam and Rahul Chari studied together at the University of Mumbai in the 1990s, where they became close friends and roommates. Nigam and Burzin Engineer met in Los Angeles as they were beginning their careers in software engineering.

Sameer Nigam holds a Bachelor’s degree in Computer Engineering from the University of Mumbai, a Master’s in Computer Science from the University of Arizona, and an MBA in Entrepreneurship from the Wharton School at the University of Pennsylvania. He worked as Director of Search Product Development at Shopzilla from 2001 to 2007. Rahul Chari holds a Bachelor’s degree in Computer Engineering from the University of Mumbai, where he was a gold medalist, and a Master’s in Computer Science from Purdue University. Burzin Engineer holds a Master’s in Computer Science from the University of Southern California and has held engineering leadership roles at multiple US technology companies including M-GO.

Mime360: The Startup That Brought Them to Flipkart

In 2009, the three reunited and co-founded Mime360, a digital media distribution platform designed to connect content owners with distributors and consumers. In 2011, Flipkart acquired Mime360. This brought Nigam, Chari, and Engineer into the Flipkart ecosystem. Nigam served as Senior Vice President of Engineering and later Vice President of Marketing at Flipkart. Chari worked on building scalable technology platforms for Flipkart’s payments and commerce infrastructure. Engineer held senior engineering leadership roles within the Flipkart group.

Their four years at Flipkart gave the founders a detailed, operational understanding of the problem they would go on to solve. Flipkart, as India’s largest e-commerce company in 2015, processed millions of transactions daily. The payment experience was deeply fragmented: net banking with its bank-specific interfaces, debit and credit cards that failed frequently on mobile networks, and cash on delivery that accounted for over 60% of orders because nothing digital was reliable enough or accessible enough to displace it. The founders saw the gap not just as a product problem but as an infrastructure problem. India needed a universal, interoperable payments layer that was not controlled by any single bank or payment network.

Acquired Before the App Launched

PhonePe was incorporated in December 2015. In April 2016, before the app had even publicly launched, Flipkart acquired PhonePe for approximately $20 million. This was a strategic integration play rather than a financial acquisition: Flipkart wanted to own its payment infrastructure rather than depend on third-party payment gateways. By bringing PhonePe in-house, Flipkart could integrate it as the default payment method across its 100 million-plus user base, giving PhonePe instant distribution that would have taken years to build organically.

The timing of the Flipkart acquisition coincided with one of the most significant developments in Indian financial infrastructure history. The National Payments Corporation of India (NPCI) launched the Unified Payments Interface in August 2016, creating a real-time, interoperable payments system that allowed any UPI-enabled app to send money from and to any bank account in India without requiring the sender and receiver to be on the same platform. No single company owned UPI. Any entity could build an app on top of it. The infrastructure problem that had long frustrated Indian digital payments was, in principle, solved.

PhonePe launched its UPI-based app in August 2016, making it one of the first non-bank entities to go live on the UPI platform. The app supported over 11 Indian languages from an early stage, which was a deliberate choice to address the population of Hindi and regional language speakers who formed the majority of India’s consumer base but had been systematically excluded from digital financial services because those services were built in English.

The Demonetization Windfall: November 2016

On November 8, 2016, the Government of India announced that Rs 500 and Rs 1,000 banknotes, which constituted approximately 86% of all currency in circulation by value, would cease to be legal tender at midnight. The policy triggered immediate, intense demand for any functional digital payment mechanism. Bank branches and ATMs ran out of cash within days. The public, forced to transact without physical currency, turned in large numbers to whatever digital options existed. PhonePe, having launched just three months earlier on the new UPI rails, was positioned at exactly the right place at the right moment.

Cashback, Merchants, and the Kirana Penetration Strategy

Between 2017 and 2020, PhonePe’s growth strategy had two parallel tracks. The first was aggressive consumer acquisition through cashback and incentive programmes. In FY19, PhonePe spent over Rs 950 crore on rewards for customers to use the platform. These were not promotional gimmicks: they were the price of building habitual payment behaviour in a population that had never before used digital payments and needed sufficient incentive to try something unfamiliar. The cashback strategy worked. By the end of FY20, PhonePe had built a user base that was using the platform not just because they were paid to, but because the habit had formed.

The second track was merchant acquisition, particularly at kirana stores and offline retail. PhonePe deployed QR codes aggressively, enabling any shopkeeper with a smartphone to accept UPI payments without any hardware investment. The merchant network, which reached 3.5 crore (35 million) merchants by January 2023, was the critical moat that digital payment competitors found difficult to replicate quickly. A consumer using PhonePe for online payments stays on PhonePe because it works offline too. The ubiquity of the QR code in neighbourhood stores reinforced the app’s daily utility.

By FY20, PhonePe had grown revenue to Rs 427 crore from Rs 245 crore in FY19, a 74% year-on-year increase. Net losses in FY20 were Rs 1,771 crore, the first year in which losses declined year-on-year. The business was still far from profitable, but the direction was correct: revenue was growing faster than expenses, and the loss-per-rupee-of-revenue was declining.

FY21: Revenue Rs 690 Crore, Losses Decline 44%

In FY21, PhonePe reported a revenue increase of 85% to Rs 690 crore from Rs 372 crore in FY20 on a standalone basis. More significantly, operational losses excluding ESOP costs fell 44% to Rs 888 crore from Rs 1,570 crore in FY20. This was the first clear evidence of operating leverage: the cost of acquiring and retaining a transaction was falling as the platform scaled. The cashback spend that had been necessary to build habits was reducing as those habits became self-sustaining. In FY24, cashback and incentive spend had declined to just over Rs 15 crore from Rs 950 crore in FY19, a reduction of over 98%.

Walmart Acquires Flipkart: PhonePe Becomes a Walmart Asset

In May 2018, Walmart acquired a controlling stake in Flipkart for approximately $16 billion, the largest e-commerce acquisition in history at the time. The deal gave Walmart ownership of PhonePe as part of the Flipkart group. Walmart’s strategic rationale included gaining access to India’s rapidly growing digital payments infrastructure through PhonePe, a business that it saw as a standalone opportunity beyond its role as Flipkart’s payment processor.

In December 2020, PhonePe underwent a partial separation from Flipkart. A number of Flipkart shareholders, led by Walmart, acquired shares directly in PhonePe, creating a structure where PhonePe had its own cap table separate from Flipkart’s. The partial separation valued PhonePe at $5.5 billion. PhonePe simultaneously raised $700 million in primary capital from existing Flipkart investors including Tiger Global. The partial separation was the first step in what would eventually become a full separation: Flipkart and PhonePe now had independent shareholder bases and independent growth paths, though both remained under Walmart’s majority ownership.

The full separation from the Flipkart Group was completed in December 2022. Flipkart subsequently launched its own competing UPI app, Super.Money, which has grown to become one of the top five UPI players in India, creating a notable situation in which Walmart now owns equity positions in two competing UPI platforms.

Singapore to India: A Rs 8,000 Crore Decision

PhonePe, like many Indian startups, had initially flipped its holding structure to Singapore in 2016, following its acquisition by Flipkart and the standard practice of holding Indian operating companies through a Singapore entity for tax efficiency and easier access to international capital. In October 2022, PhonePe announced its reverse flip: moving its domicile from Singapore back to India. The change was completed in December 2022.

The cost of the reverse flip was extraordinary. The redomiciling triggered approximately Rs 8,000 crore (roughly $943 million) in capital gains tax to the Indian government, arising from the structure in which PhonePe investors sold their shares in the Singapore entity and reinvested in the Indian entity. Walmart, as the majority shareholder, paid the largest portion of this tax bill. The company confirmed that Walmart and other investors covered the full tax liability. A PhonePe spokesperson described it at the time as the “right long-term strategy,” a formulation that is easier to defend now that the company is preparing for a domestic IPO that would have been structurally impossible while domiciled in Singapore.

Why It Was Worth It

The reverse flip logic was threefold. First, Indian regulations for digital payments companies were tightening, and regulatory compliance is substantially simpler for an India-domiciled entity than for a foreign holding company operating in India. Second, PhonePe’s entire business is India-focused. The company has no material revenues from markets outside India and has no near-term plan to expand internationally. Holding the company through Singapore created administrative complexity with no corresponding benefit. Third, and most practically, listing on Indian stock exchanges requires the issuer to be domiciled in India. PhonePe’s IPO ambition made the reverse flip not optional but necessary.

The Rs 8,000 crore tax, while large in absolute terms, is modest relative to the enterprise value unlocked. At a $15 billion IPO valuation, the tax represented approximately 5.5% of enterprise value. For Walmart, which paid the majority of the bill, it was the cost of positioning its largest single fintech asset for a domestic public listing in India’s deepest capital market.

PhonePe’s funding history is inseparable from its ownership history. The company did not go through the typical Series A, B, C venture capital progression. Instead, it was acquired before it launched, became a subsidiary of one of India’s largest e-commerce companies, was then acquired by the world’s largest retailer, and eventually raised independent institutional capital only after becoming a standalone entity.

• 2016
  April 2016

  Flipkart Acquisition (~$20 million)

  Flipkart acquired PhonePe for approximately $20 million before the app launched, integrating it as the default payment option across the Flipkart platform. This gave PhonePe distribution to 100 million-plus users instantly.

• 2018
  May 2018

  Walmart Acquires Flipkart ($16 billion)

  Walmart’s acquisition of a controlling stake in Flipkart for approximately $16 billion made PhonePe a Walmart-owned asset. PhonePe was valued implicitly as part of the Flipkart group transaction.

• 2020
  December 2020

  Partial Spinoff at $5.5 Billion; $700 Million Raised

  PhonePe partially separated from Flipkart. Flipkart shareholders led by Walmart acquired shares directly in PhonePe, establishing a standalone cap table. The company simultaneously raised $700 million in primary capital from existing investors including Tiger Global. Valuation: $5.5 billion.

• 2023
  January 2023

  General Atlantic Leads $350 Million at $12 Billion Valuation

  PhonePe raised $350 million from General Atlantic as the first tranche of a larger round, at a pre-money valuation of $12 billion. This was the first external institutional round after the Flipkart/Walmart ownership period. General Atlantic invested an additional $100 million in May 2023 within the same round.

• 2023
  May 2023

  Round Extended: Total Reaches $850 Million at $12.5 Billion

  The 2023 funding round was extended to $850 million total, with Walmart, Ribbit Capital, Tiger Global, and General Atlantic all participating. The post-money valuation settled at $12.5 billion, making PhonePe India’s most valuable fintech company at the time.

• 2025
  October 2025

  General Atlantic Invests $600 Million at $14.5 Billion Valuation

  General Atlantic made a $600 million investment in PhonePe, its largest single-company bet in India, surpassing its $870 million investment in Reliance Jio Platforms in 2020. The round valued PhonePe at $14.5 billion, a 16% premium to the 2023 valuation. Total fundraising across four major rounds reached approximately $1.6 billion in primary capital since separation from Flipkart.

Revenue: From Rs 245 Crore to Rs 7,115 Crore in Six Years

PhonePe’s revenue trajectory from FY19 to FY25 is one of the fastest-growing in Indian fintech history. Revenue from operations grew from Rs 245 crore in FY19 to Rs 7,115 crore in FY25, a 29-fold increase in six years. The compound annual growth rate over this period was approximately 75%. The growth reflects both the expansion of UPI as an infrastructure and PhonePe’s ability to convert its dominant market share into monetised transaction volume through payment service charges, platform fees, subscription fees from devices like smart speakers, and advertising fees.

The Loss Trajectory and the Path to Adjusted Profitability

PhonePe has reported net losses in every financial year since inception. This is not unusual for a platform business investing heavily in growth, but the magnitude and trajectory of the losses require careful interpretation. The headline net loss figure is dominated by ESOP (Employee Stock Option Plan) costs, which are non-cash accounting charges that reflect the value of stock options granted to employees. These are real economic obligations but do not represent cash leaving the business.

FY25 Cost Structure

In FY25, total expenditure was Rs 9,394 crore. The largest cost item was employee benefit expenses at Rs 4,097 crore, constituting approximately 44% of total expenses. This is the line that contains the large ESOP charges. Payment processing charges, which are fees paid to the UPI ecosystem and acquiring banks for processing transactions, were the second largest cost at Rs 1,688 crore. Advertising and sales promotion expenses fell 21.6% to Rs 542 crore in FY25, continuing the multi-year trend of declining cashback spend as the user base became self-sustaining. Other costs including IT, licensing, customer support, legal, and logistics made up the remainder.

PhonePe’s stated vision is to become a financial superapp: a single platform through which every Indian can access not just payments but the full range of financial services and adjacent commerce experiences. The core payments app remains the dominant revenue driver at approximately 88.5% of operating revenue in FY25. The non-payments businesses collectively grew 208% year-on-year in FY25 from a small base, indicating the early stages of meaningful diversification.

How PhonePe Built a 47% Share

PhonePe’s 47% share of UPI transactions is not accidental. It is the product of three sequential competitive advantages that compounded over time. The first was timing: PhonePe was one of the first apps live on UPI in August 2016, giving it a months-long head start over competitors in building user familiarity with UPI-based payments. The second was distribution: the Flipkart integration gave PhonePe instant access to 100 million-plus e-commerce users who were already transacting digitally and were receptive to trying a UPI payment method. The third was merchant penetration: PhonePe’s aggressive offline QR deployment, particularly in tier-2 and tier-3 cities and at kirana stores, made its payment acceptance network the most geographically comprehensive of any UPI app.

PhonePe processed 864.7 crore (8.647 billion) transactions in March 2025, accounting for 47.25% of total UPI transactions in that month. The transaction value of those payments was Rs 12.57 lakh crore. The annualised total payment value across all of PhonePe’s platforms exceeds Rs 150 lakh crore as of April 2025. Google Pay is the second-largest UPI app at approximately 34 to 36% market share. Paytm holds approximately 6 to 7%. No other app has more than 3%.

The NPCI 30% Market Cap: The Sword Over PhonePe’s Market Share

In 2020, the National Payments Corporation of India proposed a cap limiting any single third-party UPI application to 30% of total UPI transaction volume. If enforced, this cap would require PhonePe to stop onboarding new users and throttle its growth until its market share declined from 47% to below 30%, a reduction that would take years and would require its competitors to grow substantially. The NPCI has repeatedly deferred enforcement of this cap. The deadline was most recently deferred to December 2026.

The NPCI’s repeated deferrals suggest discomfort with enforcing a rule that would penalise market leadership achieved through product quality and consumer preference. However, the cap has not been formally withdrawn, and each deferral creates uncertainty. The resolution of this regulatory question is, arguably, the single most important binary risk facing PhonePe as a public company.

DRHP Filing and Structure

PhonePe filed its confidential draft red herring prospectus with SEBI for a domestic IPO in September 2025. An updated DRHP was filed on January 21, 2026. The structure of the IPO is an Offer for Sale (OFS) only: no fresh capital is being raised. All proceeds go to selling shareholders. The total OFS size is up to 5.06 crore equity shares. Walmart’s holding entity plans to sell approximately 4.59 crore shares, or roughly 9.06% of its current equity. Tiger Global and Microsoft are divesting their entire holdings through smaller tranches.

The company appointed Kotak Mahindra Capital Company, Citigroup, JPMorgan Chase, and Morgan Stanley as merchant bankers. The IPO is expected to raise approximately Rs 12,000 crore (approximately $1.5 billion) at a valuation of $14.5 to $15 billion. This would make PhonePe one of the largest IPOs in Indian history and the largest pure-fintech listing on Indian exchanges.

What Investors Are Valuing

At a $15 billion valuation, PhonePe would be priced at approximately 21x FY25 revenue. For context, this is in line with or modestly above where mature fintech payment companies trade globally, reflecting the premium attached to PhonePe’s near-monopoly position on India’s UPI infrastructure. Investors buying at this valuation are pricing in continued strong revenue growth (the 40% FY25 growth sustaining at 25 to 30% for several years), margin expansion as ESOP charges normalise and operating leverage continues, successful monetisation of the non-payments businesses (insurance, lending, wealth), and the assumption that the NPCI 30% cap is not enforced.

How PhonePe Makes Money

PhonePe’s revenue model has four components within its payments business and a growing fifth component from financial services and consumer tech. The payment services revenue stream, which contributed Rs 6,300 crore or 88.55% of operating revenue in FY25, breaks down into transaction processing fees (charges to merchants and billers for processing bill payments, digital gold purchases, travel bookings, and other non-P2P transactions), platform fees (charges for using the application including charges on payment devices), subscription fees (monthly charges for smart speaker and other payment device deployments), and advertising fees (charges to financial services and other advertisers for in-app placement).

Critically, person-to-person UPI money transfers are free for consumers and generate no direct fee revenue for PhonePe. The government’s MDR (Merchant Discount Rate) policy for UPI means that basic UPI payments also attract zero MDR. Revenue is generated only where there is a service layer above the basic UPI infrastructure: bill payments, insurance distribution, lending referral fees, stockbroking commissions, and device subscription fees.

What PhonePe Built in Nine Years

From three engineers in Bengaluru in December 2015 to a company that processes nearly half of all digital payments in India is a decade of compounding advantages. The founders identified the right infrastructure bet before UPI launched. The Flipkart acquisition gave them distribution that money could not buy. Demonetization gave them a consumer adoption shock that competitors needed years to replicate. The aggressive QR code deployment and cashback strategy built habits that proved permanent. And the Walmart ownership gave them the capital depth to sustain heavy losses through a decade of growth investing without the existential funding pressure that constrained smaller competitors.

The financial trajectory is clear: revenue has grown at roughly 75% CAGR since FY19, the business has reached adjusted PAT profitability at Rs 630 crore in FY25, and the cost discipline is evident in the 21.6% reduction in advertising spend and the continued decline in cashback outlays. The non-payments businesses grew 208% in FY25, signalling that the diversification strategy is working, albeit from a small base.

The Three Questions That Will Define the Next Five Years

First, will the NPCI 30% market cap be enforced? If yes, PhonePe’s market position will be permanently impaired. If not, it retains its structural dominance and continues to compound its distribution advantage. This is the regulatory binary that investors will price at the IPO.

Second, can PhonePe successfully monetise its 600 million users through financial services? The insurance and lending growth is promising, but 88.5% of revenue still comes from payments. The transition to a diversified financial superapp requires products that are genuinely better than competitors’ at insurance distribution, lending, and wealth management, not just better at cross-selling within an existing payment relationship. Building financial services at scale requires regulatory depth, underwriting capability, and product trust in categories where PhonePe is not yet the default brand.

Third, how does the OFS-only IPO structure affect the company’s growth capital position? The IPO raises nothing for PhonePe. All proceeds go to Walmart and other sellers. The company will not receive any IPO capital for infrastructure, product development, or international expansion. Post-IPO growth must be funded from operating cash flows or future secondary market capital raises. This is fine for a business generating Rs 1,477 crore in adjusted EBITDA, but it means the IPO is primarily a liquidity event for Walmart, not a growth-financing event for PhonePe.

Disclaimer: This article is for informational and educational purposes only and is current as of June 12, 2026. Financial data is sourced from PhonePe’s consolidated annual reports and regulatory filings; PhonePe’s own press releases; and the updated Draft Red Herring Prospectus (UDRHP) dated January 21, 2026. Shareholding data and IPO details are from the UDRHP. UPI market share data is from NPCI. This article does not constitute investment advice or a recommendation to apply for the PhonePe IPO. Readers should conduct their own research and consult a SEBI-registered investment adviser before making investment decisions. fiscalzenith.com accepts no liability for decisions made in reliance on information in this article.