PhonePe Refiles IPO Papers; Walmart Cuts 9% Stake as Microsoft, Tiger Global Exit

On January 21, PhonePe, with the backing of Walmart, submitted its updated draft red herring prospectus to SEBI for an Initial Public Offering (IPO) that will be conducted entirely through an offer for sale (OFS). The total allocation for this issue is 5.06 crores of equity shares currently held by existing shareholders; however, no new capital will be raised for the company in this offering.

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The promoter, WM Digital Commerce Holdings, will offer 4.59 crore of those shares, reducing its ownership from 71.77 % to 62.71 %. The balance of shares in the issue will be sold by Tiger Global and Microsoft.

The proceeds from this offering will be distributed entirely to the selling shareholders.

IPO Structure and Stakeholders

The offering will contain the offer for sale (OFS) of WM Digital Commerce Holdings, the promoter of PhonePe and a subsidiary of Wal-Mart International Holdings, as the primary seller of 4.59 crore shares. General Atlantic will continue to be the largest public shareholder with an 8.98% stake, followed by Headstand with a 5.73% stake.

The commercial banks involved as merchant bankers for this IPO include Kotak Mahindra Capital, JP Morgan, Citigroup, Morgan Stanley, Axis Capital, Goldman Sachs, Jefferies, and JM Financial.

PhonePe is in competition with One 97 Communications, the parent company of Paytm, which is publicly traded.

Financial Performance Amid Losses

During the 6 months ending in September, PhonePe lost ₹1,444.4 crores. This is an increase over the previous loss of ₹1,203.2 crores. However, PhonePe has had a 22.2% increase in Revenue from operations, reaching ₹3,918.5 crores.

For the entire fiscal year, PhonePe's loss decreased from ₹1,996.1 crores to ₹1,727.4 crores, with Revenues increasing by 40.5% to ₹7,114.8 crores.

This is due to PhonePe's leadership in UPI transactions.

Market Leadership in Digital Payments

The first UPI App from a private non-banking company was launched by PhonePe in August 2016, shortly after UPI was developed. The National Payments Corporation of India (NPCI) reported that PhonePe has the largest transaction volume and total Payment Value for Customer-initiated UPI transactions.