PhonePe vs Paytm: Re-rating Likely After PhonePe IPO
Paytm currently leads in merchant payment revenue, while PhonePe still needs to expand its merchant client base to compete effectively
Mumbai: IPO-bound PhonePe is attracting analysts’ comparisons with its listed peer One 97 Communications, the owner of Paytm. Despite arriving nearly five years later, PhonePe has grown rapidly, taking advantage of Paytm’s slowdown when it came under regulatory scrutiny that restricted its growth.
Founded in December 2015 in Bengaluru by former Flipkart executives and later acquired by Flipkart— which itself was later bought by US retail giant Walmart—PhonePe now competes directly with Paytm, which was established in 2010.
Paytm gained prominence during the demonetisation wave in November–December 2016, emerging as one of India’s key cashless payment solutions. Today, both PhonePe and Paytm compete in consumer and merchant payment solutions as well as in the online financial products distribution market.
PhonePe is rapidly narrowing the revenue and earnings gap between the two companies. Paytm currently leads in merchant payment revenue, while PhonePe still needs to expand its merchant client base to compete effectively. PhonePe’s larger consumer payment base has not translated proportionately into revenue gains.
PhonePe’s and Paytm’s H1FY26 merchant payment revenues stood at Rs 9.9 billion and Rs 20.2 billion, respectively. Consumer payment revenue for PhonePe is 2.5 times higher than Paytm’s, but Paytm earns 34 per cent more revenue per consumer, according to Emkay Global Financial Services.
“PhonePe has a significantly larger consumer franchise, with around three times the base of active consumers and nearly nine times the scale of Paytm in consumer total payment value (TPV). On the merchant side, while the registered merchant bases are comparable, Paytm maintains an advantage with a larger installed base of payment devices and a marginally higher merchant TPV. In addition, Paytm is substantially ahead in lending across both consumers and merchants, with disbursals at around 2.5–3 times those of PhonePe,” said a pre-IPO research report by Bernstein.
“Paytm is operating around breakeven, while PhonePe is still loss-making at the PBT (profit before tax) level. The fixed cost bases of the two companies are comparable, but PhonePe’s large ESOP expense—at roughly around 40 per cent of revenue—drives the difference in PBT-level profitability,” Bernstein analysts added.
PhonePe’s foray into the equities market through its Share.Market app is similar to Paytm’s entry through Paytm Money.
“While Paytm had the early-mover advantage, we believe that PhonePe’s large organic consumer base will allow it to grow aggressively. However, digital-first players like Zerodha and Groww are already well established, and it will be difficult to attract customers away from these platforms,” Emkay Global said.
“PhonePe has significantly scaled up its distribution business in the past 12 months, which has implications for Paytm’s business. However, PhonePe also faces challenges from revenue losses due to recent regulatory changes, including the Reserve Bank of India discontinuing rent payments through credit cards, real-money gaming restrictions, and the curtailment of incentives under the Payment Infrastructure Development Fund (PIDF),” said Macquarie Equity Research in a recent pre-IPO review.
“PhonePe’s latest valuation, based on its last transaction with General Atlantic in September 2025 and media reports, is around USD 13–15 billion—roughly 60–90 per cent higher than Paytm—despite being EBITDA negative, while Paytm is EBITDA positive,” Macquarie added.
On Friday, shares of One 97 Communications closed at Rs 1,040, down 1.23 per cent, with a market capitalisation of about Rs 66,250 crore (approximately USD 7 billion).while keeping all key data.
