3 months ago
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Broking steadfast Macquarie successful an equity probe study has drawn cardinal concerns related to ESOP costs and gross attraction for the projected PhonePe archetypal nationalist offering (IPO.) In its report, Macquarie has flagged that PhonePe’s precocious Employee Stock Ownership Plan (ESOP) expenses are a ‘significant drag’ connected its EBITDA margins.
“ESOP costs accounted for 46% of PhonePe’s gross during the archetypal fractional of FY26, the highest among its fintech peers,” Macquarie said adding that PhonePe’s listing would service arsenic a valuation benchmark successful it’s space.
“Despite the borderline unit from ESOPs, PhonePe maintains a ascendant 45% stock of India’s UPI integer payments market. This dominance opens doorway to further risks successful the signifier of NPCI capping UPI marketplace stock to 30% by 31 December 2026 – which tin impact onboarding of caller customers and hence the revenues too,” the broking steadfast said.
As per the PhonePe DRHP ESOPs correspond non-cash expenses aligned with semipermanent worker ownership and worth creation. Elevated ESOP costs bespeak one-time grants and vesting patterns, not steady-state operating costs. Excluding ESOPs, PhonePe has demonstrated improving operating leverage, outgo and subject astatine scale.
As the institution matures and transitions to a listed environment, ESOP strength is expected to normalise, accordant with lifecycle trends crossed exertion platforms, arsenic per the DRHP.
According to the updated connection papers filed with SEBI, PhonePe’s gross concertation hazard is heightened by reliance connected gross sources (up to 20%) which person been oregon transportation the hazard of being restricted oregon discontinued.
Macquarie said, “Of 1HFY26, person to 19% of revenues (24% arsenic of FY25) were sourced from rent (rent payments done recognition paper which has been discontinued by RBI), RMG (real wealth gaming) and PIDF (RBI’s outgo infrastructure improvement fund) incentives which person been discontinued/restricted.”
Also PhonePe’s dependence connected UPI incentives from Government is further 6% of revenues (FY25) is overmuch higher (to the grade of 3X) than its adjacent PayTM, it added.
As per PhonePe DRHP these changes are anticipated, disclosed, and factored into concern planning.
PhonePe’s semipermanent monetisation absorption is connected merchant payments and value-added services, organisation of regulated fiscal products (insurance, communal funds, lending) and platform-led monetisation crossed a ample idiosyncratic and merchant base.
Government incentives (UPI incentives, PIDF grants) are variable, non-recurring, and not foundational to the company’s semipermanent profitability model. As per the DRHP revenue
mix is structurally shifting toward diversified, regulation-compliant, scalable sources.
The UPI level which is simply a Walmart entity precocious received SEBI support for its IPO and is expected to pat the superior marketplace successful the coming weeks.
The institution plans to rise astir to $1.5 cardinal astatine a valuation of astir $15 cardinal according to the report.
PhonePe’s IPO volition comprise wholly of an offer-for-sale (OFS) transaction. As per the updated DRHP, Tiger Global and Microsoft are offering up their afloat stakes successful the company, portion Walmart is choosing to clasp its bulk involvement and selling up to 45.9 cardinal shares (about 9% of the company).
Up to 50.66 cardinal shares are up for sale.
Macquarie besides mentions that PhonePe exhibits respective important strengths and maturation indicators.
The brokerage has besides highlighted PhonePe’s operational ratio and engagement; unchangeable merchant enactment and halfway profitability imaginable arsenic good arsenic concern diversification and growth.
As per the study PhonePe’s full gross grew from ₹50.6 cardinal successful FY24 to ₹71.1 cardinal successful FY25. The institution reported importantly higher nett outgo gross compared to its main rival, Paytm, successful 1HFY26.
