Beyond UPI, Merchant Payments and Financial Services Power 42% of PhonePe Revenue

Digital payments giant PhonePe has reported strong revenue growth and sharply narrowing losses over the past three fiscal years, signalling a shift towards sustainable monetisation and operational efficiency, according to its draft red herring prospectus (DRHP).

Revenue from operations rose to Rs 71,14.85 crore in FY25 from Rs 2,914.28 crore in FY23, reflecting a compound annual growth rate (CAGR) of 56.25 per cent.

According to the company's DRHP, PhonePe is successfully transitioning towards long-term monetisation and operational efficiency.

The company's revenue mix has diversified significantly beyond core UPI payments.

Merchant Payments contribution increased from 14.75 per cent in FY23 to 30.78 per cent by September 2025.

Financial Services, including lending and insurance distribution, expanded from 0.96 per cent in FY23 to 11.55 per cent in the first half of the current fiscal year.

Together, merchant payments and financial services accounted for 42 per cent of revenue, underscoring growing monetisation across verticals.

Losses narrowed substantially during the period. Restated losses declined by over Rs 1,060 crore between FY23 and FY25 to Rs 1,727.41 crore. Loss margins improved to (22.64) per cent from (90.68) per cent over the same period.

The company achieved positive adjusted EBITDA in FY24 and FY25 and reported adjusted EBIT profitability in FY25. It also generated free cash flow of Rs 1,90.47 crore in FY25 and over Rs 2,50 crore in the six months ended September 30, 2024.

PhonePe attributed the improvement to disciplined capital allocation and investments in proprietary technology infrastructure, including automated systems and in-house data centres, enabling scale without proportionate cost increases.

By utilising automated systems and its own data centres, PhonePe has managed to scale transaction volumes without a corresponding spike in costs.

"Our business model prioritises free cash generation to support reinvestment, expansion into new platforms, and balance sheet strength," the company stated in its disclosure.

Founded in 2016 and headquartered in India, PhonePe had over 65 crore registered users and a merchant network of more than 4.7 crore as of September 30, 2025. Its offerings span consumer and merchant payments, lending and insurance distribution, and new platforms such as Share.Market and Indus Appstore.