PhonePe IPO Deep Dive: Updated DRHP Shows Growth Claims, Who’s Cashing Out and Principal Risks

PhonePe filed an Updated Draft Red Herring Prospectus (UDRHP-I) on Wednesday proposing a 100% book-built offer-for-sale (OFS) of up to 50.66 million (506,604,456) equity shares. Once priced, these shares will list on both the BSE and NSE. Since this is a pure OFS, PhonePe will not receive any proceeds, all sale proceeds will go to the existing shareholders who are selling.

The shares being offered (face value ₹1 each) are being sold by the promoters and select investors and will represent a portion of the company’s post-offer paid-up equity; the exact percentage will be disclosed at pricing. The UDRHP states that PhonePe has 50.66 million equity shares outstanding before the offer and that it has received in-principle listing approvals from both exchanges.

The filing names the selling shareholders and the book-running lead managers; the final price band, lot size and allotment mix will be announced closer to the bidding period.

Share allocation will follow SEBI’s ICDR rules: at least 75% to qualified institutional buyers (including anchors), up to 15% to non-institutional investors, and up to 10% to retail investors.

Applications will be accepted through ASBA and UPI channels. Further operational details, including anchor allocations and the exact timetable, will be published when the company finalises the price band and opens the offer.

Who’s Selling What?

Most of the shares in the offer are being sold by WM Digital Commerce Holdings, the promoter selling shareholder, which plans to offload up to 45,942,496 equity shares.

Two other existing investors are also participating in the sale: Tiger Global, which is offering up to 1,039,160 shares and Microsoft Global Finance Unlimited Company, which is selling up to 3,678,790 shares.

The UDRHP includes the necessary consents from each selling shareholder, along with the relevant board or shareholder resolutions approving the sale. It also discloses that the weighted average cost of acquisition for the shares being offered is ₹1,996.80 per share.

Since the IPO is a pure offer for sale, PhonePe will not receive any proceeds from the issue. All net proceeds, after deducting offer-related expenses, will go to the selling shareholders.

Given the size of its stake being sold, WM Digital Commerce Holdings is expected to realise the largest share of the IPO proceeds. The filing also outlines the pricing framework, noting that the price band will be set using historical weighted average acquisition costs and recent primary and secondary transactions, with the weighted average cost of the last five transactions disclosed as a benchmark.

PhonePe Financials

The UDRHP sets out PhonePe’s restated consolidated financials (in ₹ million). For FY2025, the company reported revenue from operations of ₹71,148.585 million and total income of ₹76,313.825 million. During the year, adjusted EBITDA stood at ₹14,771.926 million, translating into an adjusted EBITDA margin of about 20.76%. However, on a restated basis, PhonePe continued to report a net loss of ₹17,274.10 million.

The filing also includes adjusted profit or loss figures and platform-level EBITDA break-ups, which the management uses to demonstrate improving underlying business economics despite continued GAAP losses. At the same time, the UDRHP cautions investors that the six-month financials ended September 30, 2025 should not be treated as indicative of full-year performance.

Positive Scale, Negative Margins

The UDRHP presents a mix of business strengths and material risks for investors to consider. On the positive side, it highlights PhonePe’s large scale in India’s digital payments market, its multi-platform strategy spanning payments, digital distribution and financial services, strong traction among both consumers and merchants, and improving platform-level adjusted EBITDA metrics that point to better underlying economics.

At the same time, the filing flags several important risks. As this is PhonePe’s first public offering, there is no prior trading history for the shares. The company continues to report GAAP losses and negative net profit margins, and operates in a heavily regulated fintech and payments environment that carries operational and compliance risks.

The UDRHP also notes foreign currency and repatriation risks for non-resident shareholders, the possibility of post-listing surveillance measures or trading restrictions (such as ASM or GSM), and the fact that this is a pure offer for sale, meaning PhonePe will not receive any IPO proceeds to fund its future growth. Investors are therefore advised to carefully read the “Risk Factors” section and Management’s Discussion in the prospectus before making an investment decision.