Will PhonePe's IPO trigger re-rating for Paytm? Macquarie explains

PhonePe’s initial public offering (IPO) filing has emerged as a key upcoming event for India’s fintech sector, according to Macquarie. Media reports indicate that the company may seek a valuation of around $15 billion and a 10 per cent stake sale by existing shareholders that could raise about $1.5 billion. PhonePe is among India’s largest fintech platforms, offering a wide range of payments services for consumers and merchants, and is the biggest unified payments interface (UPI) third-party application provider (TPAP) with over 45 per cent market share.

How will Phone Pe’s listing impact Paytm?

According to Macquarie, PhonePe’s proposed listing will be watched closely for its potential read-through on Paytm's (One 97 Communications) valuation and near-term re-rating, particularly because PhonePe has been rapidly scaling up its financial services distribution (loans, mutual funds, insurance). 

 

The share of this business in PhonePe’s revenues has risen from 4 per cent in FY24 to 13 per cent in H1FY26, and further growth could intensify competition for Paytm, where nearly one-third of revenue is tied to distribution, noted Macquarie. Analysts also cautioned that sharper competition could pressure margins in the distribution segment. 

Valuation gap despite profitability differences

PhonePe’s valuation, based on the September 2025 transaction with General Atlantic and media reports, is seen in the $13–15 billion range—about 60–90 per cent higher than Paytm’s market capitalisation, even though PhonePe is Earnings before interest, tax, depreciation and amortisation (Ebitda)-negative, while Paytm is Ebitda-positive. The valuation differential is likely to be a key discussion point as investors assess profitability, growth, and regulatory risk across listed fintech names, reckons Macquarie.  If PhonePe lists at around $13–15 billion, it would imply 37–43x H1FY26 adjusted revenues (adjusted for no revenues from rent, payments infrastructure development fund (PIDF), and real money gaming (RMG)), compared with 19x for Paytm. The gap suggests PhonePe’s IPO pricing could influence how the market values Paytm and the broader fintech sector, particularly in the near term, depending on the final valuation and investor appetite for growth versus profitability.

Challenges for PhonePe

Macquarie has flagged few near-term challenges in PhonePe’s draft red herring prospectus (DRHP). As of H1FY26, around 19 per cent of revenues (and 24 per cent in FY25) came from rent payments via credit cards (discontinued by the Reserve Bank of India (RBI)), RMG, and PIDF incentives, which have been discontinued or restricted. 

 

In addition, dependence on government UPI incentives accounted for 6 per cent of FY25 revenues, against 2 per cent for Paytm. PhonePe also faces a risk from National Payments Corporation of India’s (NPCI) plan to cap UPI market share at 30 per cent by December 31, 2026, which could affect incremental customer additions. The company also earns from digital gold, a segment that has been under regulatory scrutiny.  Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers discretion is advised.