PHONEPE Growth Is 39% Without Rent and Gaming, but Adjusted EBITDA Nearly Halved

Growth Is 39% Without the Two Shut-Down Lines, but Their Gross Margin Was Over Three-Quarters of Adjusted EBITDA

Rs. 589.51 crore of PhonePe's revenue in the six months to 30 September 2025 came from rent payments and online gaming that were shut down during the half, and those lines' gross margin (revenue less payment processing charges) equals 77% of the half's Adjusted EBITDA, which is struck after advertising, staff and other costs.

PhonePe is India's biggest UPI^» app, with a 46.85% share of UPI transaction volume in September 2025, and it is preparing to sell shares to the public for the first time. Its updated draft prospectus of 21 January 2026 shows revenue up 22.2% and an Adjusted EBITDA^» that fell sharply. Without the two shut-down lines, revenue grew 39.2%.

Without rent payments and online gaming, revenue grew 39.2%, not 22.2%

Rent payments and real-money gaming were Rs. 589.51 crore (15.0%) of the half's revenue, against Rs. 815.33 crore a year earlier, and both were closed down inside the period. "Rent & related categories", the filing's label, brought in Rs. 518.52 crore (Rs. 668.26 crore a year earlier); the company discontinued them after a 10 September 2025 letter from the Reserve Bank of India about credit card payments of rent to beneficiaries who had not been onboarded as merchants. Online money games, which brought in Rs. 70.99 crore (Rs. 147.07 crore a year earlier), were banned by law on 22 August 2025. Without the two, revenue was Rs. 3,328.96 crore against Rs. 2,392.19 crore, an increase of 39.2%. The filing publishes this same ex-rent, ex-gaming measure itself (an increase of 39.16%), so the 39% is the company's own framing: revenue from operations for the six months to 30 September 2025 and 2024, less the two lines in both periods.

On the reported figures, the growth did not come from the biggest line. Of the reported Rs. 710.95 crore revenue increase, Merchant Payments and Lending and Insurance Distribution supplied 96.9%, while Consumer Payments revenue was flat (down 0.4%) because the rent revenue inside it fell; excluding rent, Consumer Payments grew 9.2% (see One Reporting Segment, Four Offerings). Part of the headline is also a subsidy: revenue includes Rs. 167.49 crore of incentives for deploying payment devices (Rs. 29.07 crore a year earlier), which the prospectus attributes to a Reserve Bank scheme that remained in effect until 31 December 2025.

Adjusted EBITDA nearly halved because costs outgrew revenue, and Rs. 1,812.87 crore of stock pay sits outside it

The costs that Adjusted EBITDA counts grew 35.6% to Rs. 3,664.56 crore against revenue growth of 22.2%, which took Adjusted EBITDA down 49.7% to Rs. 253.91 crore, a 6.5% margin against 15.7%. The basis is the post's own: revenue less Adjusted EBITDA, which equals total expenses less share-based pay, depreciation and finance costs, the three lines Adjusted EBITDA leaves out; total expenses including them grew 29.7%. Payment processing charges rose 38.2% to Rs. 1,090.00 crore (27.8% of revenue, from 24.6%), driven by more customers and faster growth in card transactions. Advertising and sales promotion rose 48.1% to Rs. 455.51 crore (11.6% of revenue, from 9.6%). Staff cost before stock pay rose 26.6% to Rs. 1,056.24 crore as employees grew to 12,338 from 10,063 and contract staff to 19,356 from 14,906. Revenue after payment processing charges grew 16.9%, a slower pace than the headline revenue growth.

Adjusted EBITDA also leaves out all share-based pay, and that charge is large: Rs. 1,812.87 crore, or 46.3% of revenue (41.0% a year earlier), is added back to reach it. Of that, Rs. 799.15 crore is a one-time impact the filing ties to two actions: Rs. 785.88 crore from modifying the PhonePe Founder Awards, India scheme (a buyback clause replaced by lock-up provisions, approved by the board on 12 September and by shareholders on 19 September 2025), and Rs. 13.27 crore of unamortised expense recognised when employees surrendered options under a one-off offer approved by the board on 7 August 2025. Without it, the stock-pay cost fell 22.9% to Rs. 1,013.72 crore from Rs. 1,315.25 crore. In the post's view, cost that a company pays in shares instead of cash is still a cost to the shareholders who will be diluted.

Take out the two one-offs and the loss narrowed 10.3%

The reported loss of Rs. 1,444.42 crore includes a Rs. 434.47 crore gain on selling part of a stake in another company and the Rs. 799.15 crore one-time stock-award charge. Remove the gain and the loss is Rs. 1,878.90 crore, 56.2% larger than the Rs. 1,203.21 crore of a year earlier. Remove the charge as well and it is Rs. 1,079.75 crore, 10.3% smaller. Which of those three numbers is "the" loss depends on whether one treats stock pay as a real cost, so the post shows all three.

The lines that were switched off matter here. In the half they earned a combined gross margin (revenue less payment processing charges) of Rs. 195.66 crore (rent Rs. 135.60 crore, gaming Rs. 60.06 crore), a year earlier Rs. 400.84 crore. That is 77% of this half's Adjusted EBITDA, before any other cost that went with them, and it will not recur from October 2025 onwards. The filing says plainly that results from October 2025 will exclude any further impact from either line.

The Prescription

PhonePe should push all of its new effort into the two offerings that actually moved this half, Merchant Payments and Lending and Insurance Distribution, and let its consumer app be what it already is: a cheap, enormous front door (23.78 crore monthly active customers) that brings the customers those two offerings sell to. Merchant revenue grew 60.1% and lending and insurance revenue 108.8%. Neither is free of regulatory dependence: merchant revenue includes Rs. 167.49 crore of device incentives under a scheme that ran until 31 December 2025, and lending now carries a default guarantee to partner lenders (see Beyond the Usual below). One more dependence bears directly on this plan, in the post's own inference: the proposed 30% cap on any one app's share of UPI volume, deferred to 31 December 2026, against PhonePe's 46.85%; the filing says enforcing it may have a material impact on its cash flows and overall growth trajectory, and in the post's reading it could slow the onboarding of new customers into the consumer front door the plan relies on. It should also use the pre-IPO moment to cut a cost line it controls: advertising rose 48.1% in a half when its consumer revenue per transaction was falling.

What it should do less of, in the post's view, is lean on revenue lines that a single regulatory decision can end. Rent payments through credit cards and real-money gaming together were 15.0% of revenue, and their gross margin equalled 77% of Adjusted EBITDA; both were discontinued in the half, one after a regulator's letter and the other when a new law banned it. The filing, to its credit, discloses it. A company that sells shares to the public should show investors how much of its revenue sits in lines of that kind before a regulator acts.

Key Financial Metrics

PhonePe's income statement has no line for operating profit, no line called Adjusted EBITDA (the company defines it in a separate reconciliation) and reports in millions of rupees; everything below is converted to crore. FX: Rs. 88.71 = $1, the 30 September 2025 rate stated in the prospectus (it cites the Reserve Bank and FBIL); a market close that day was Rs. 88.84, 0.15% away, and the post uses the filing's rate, applied to the latest half only.

Metric	H1 FY26 (Rs. crore)	H1 FY26 (USD)	H1 FY25 (Rs. crore)	YoY	Why
Net revenue (revenue from operations)¹	3,918.47	~$441.7M	3,207.52	+22.2%	Merchant Payments and lending/insurance up; Consumer Payments flat
Revenue after payment processing charges²	2,828.47	~$318.8M	2,418.97	+16.9%	Processing charges grew 38.2%
Adjusted EBITDA³	253.91	~$28.6M	504.80	-49.7%	Costs grew faster than revenue; excludes Rs. 1,812.87 crore of stock pay
Operating loss⁴	-2,150.80	~-$242.5M	-1,472.51	loss 46.1% wider	Includes stock pay and the one-time stock-award charge
Net loss (restated)⁵	-1,444.42	~-$162.8M	-1,203.21	loss 20.0% wider	Includes a Rs. 434.47 crore gain and the Rs. 799.15 crore one-time stock-award charge
Free cash used (company-defined)⁶	-521.83	~-$58.8M	+250.16	turned negative	Operating cash flow was -Rs. 117.27 crore against +Rs. 1,012.65 crore; the filing also states a one-time cash-flow impact of Rs. 110.09 crore in the half from the stock-option actions and does not say which cash-flow line holds it
Bank balances and investments⁷	12,159.77	~$1,370.7M	6,196.46	+96.2%	Includes Rs. 5,548.70 crore received for employees' tax and paid out on 6 October 2025

¹ Revenue from operations, six months to 30 September 2025 (H1 FY26) against the six months to 30 September 2024 (H1 FY25), restated consolidated statements. Payment processing charges are a cost, not netted from this figure; the next row nets them. ² The post's own subtraction, revenue from operations less payment processing charges. ³ Company-defined: loss before other income, finance costs, depreciation, share of associate, exceptional item, tax and share-based payments. ⁴ The post's own measure, revenue from operations less total expenses, so it excludes other income of Rs. 256.04 crore and counts stock pay; the company's own Adjusted EBIT, which adds stock pay back, is -Rs. 313.83 crore (H1 FY25: -Rs. 141.41 crore). ⁵ Restated loss for the period, after a tax credit of Rs. 6.17 crore. ⁶ Operating cash flow, less capital spending, plus asset sale proceeds, less lease payments. ⁷ Investments, cash, and bank balances other than cash, plus a Rs. 0.50 crore long-term deposit; at the end of the period.

Over the full years, the pattern is the same direction with a very different scale. All figures Rs. crore, fiscal years ended 31 March:

Metric	FY23	FY24	FY25
Revenue from operations	2,914.29	5,064.13	7,114.86
Adjusted EBITDA	-375.46	651.88	1,477.19
Adjusted EBITDA margin	-12.9%	12.9%	20.8%
Net loss (restated)	-2,796.07	-1,996.17	-1,727.41
Share-based payments	2,057.31	2,193.17	2,357.86

The half's 6.5% Adjusted EBITDA margin is therefore under a third of FY25's 20.8%, not a continuation of it. The filing's section on seasonality says "Our business is not influenced by seasonality", so the post does not read the lower first-half margin as a seasonal dip; the comparison against FY25 is between the filing's own six-month and twelve-month figures and is not adjusted.

One Reporting Segment, Four Offerings

PhonePe reports a single operating segment, because its board assesses performance at a consolidated level; revenue is described by four offerings: Consumer Payments, Merchant Payments, Lending and Insurance Distribution, and Other services. The four sum to the group's Rs. 3,918.47 crore with no gap, and the filing gives no profit measure by offering, so there is no segment profit to reconcile to the group figure and no amount to label Not attributed to any segment.

Consumer Payments earns less per transaction on average

Consumer Payments revenue was Rs. 2,199.78 crore, down 0.4%, while customer transactions grew 27.3% and payment value 18.9%, so reported revenue per customer transaction fell 21.7% to 41.2 paise from 52.6 paise (the post's own ratio, consumer revenue divided by all customer transactions; reported basis, including rent). All of rent revenue sits in this offering and was switched off, so on a second basis, excluding rent, Consumer Payments grew 9.2%, to Rs. 1,681.25 crore from Rs. 1,539.71 crore, before any split of gaming revenue, which the filing does not give by offering for the half, and revenue per customer transaction fell 14.2%, to 31.5 paise from 36.7 paise (Rs. 1,681.25 crore over 5,340 crore transactions; Rs. 1,539.71 crore over 4,196 crore). The filing does not give rent transactions, so the denominator still includes them and the 14.2% approximates the like-for-like change. Payer-side government incentives within this revenue fell to Rs. 41.11 crore from Rs. 100.75 crore. It remains 56.1% of revenue, down from 68.8%.

Merchant Payments is where the growth is, on fewer merchants

Merchant Payments revenue rose 60.1% to Rs. 1,206.09 crore (30.8% of revenue, from 23.5%), while the number of monthly active merchants fell 1.4%. Merchant transactions grew 25.2% and merchant payment value 21.4%, so, in the post's reading, the extra revenue is coming from more activity and more fees per active merchant (including the Rs. 167.49 crore of device-deployment incentives and card-based payments with higher fees), rather than from more merchants.

Lending and Insurance Distribution doubled from a small base

Lending and Insurance Distribution revenue rose 108.8% to Rs. 452.63 crore (11.6% of revenue, from 6.8%). The filing attributes it to more policies distributed and to higher loan disbursement value, from which PhonePe receives "a fixed percentage". It says it was not exposed to loan defaults or insurance claims in the half "except to the extent of Default Loss Guarantee" given to partner lenders, "not exceeding 5% of the total amount disbursed out of the identified loan portfolio" (see Beyond the Usual below). The revenue is therefore not free of credit risk, and it also depends on partners' appetite and on the Reserve Bank's digital lending rules, which the same prospectus names among the regulation it must follow.

Comparing the four

Offering	H1 FY26 (Rs. crore)	Share of revenue	H1 FY25 (Rs. crore)	Share of revenue	YoY	Share of the revenue increase
Consumer Payments	2,199.78	56.1%	2,207.97	68.8%	-0.4%	-1.2%
Merchant Payments	1,206.09	30.8%	753.35	23.5%	+60.1%	63.7%
Lending and Insurance Distribution	452.63	11.6%	216.78	6.8%	+108.8%	33.2%
Other services	59.98	1.5%	29.41	0.9%	+103.9%	4.3%
Revenue from operations	3,918.47	100.0%	3,207.52	100.0%	+22.2%	100.0%

Basis: six months to 30 September 2025 and 2024, as the company presents its four offerings. Other services is stock broking, mutual fund distribution and marketplace services.

Key Operational Metrics

Arrow = the way the number moved against the six months to 30 September 2024. Green = good for the business, red = bad, grey = neither or flat.

Customers

• Monthly active customers (at the end of September): 23.78 crore, up from 21.29 crore a year earlier (+11.7%).
• Daily active customers: 10.66 crore, up from 9.14 crore (+16.6%).
• Customer transactions (in the half): 5,340 crore, up from 4,196 crore (+27.3%).
• Customer payment value: Rs. 73.70 lakh crore, up from Rs. 61.98 lakh crore (+18.9%).
• Consumer revenue per customer transaction (the post's own ratio, reported basis): 41.2 paise, down from 52.6 paise (-21.7%); excluding rent, 31.5 paise, down from 36.7 paise (-14.2%).

Merchants

• Monthly active merchants: 1.11 crore, down from 1.13 crore (-1.4%).
• Daily active merchants: 67.5 lakh, up from 65.1 lakh (+3.7%).
• Merchant transactions: 2,496 crore, up from 1,993 crore (+25.2%).
• Merchant payment value: Rs. 8.51 lakh crore, up from Rs. 7.01 lakh crore (+21.4%).

People

• Employees: 12,338, up from 10,063 (+22.6%).
• Contract staff (mostly on-ground merchant sales and support): 19,356, up from 14,906 (+29.9%).

Beyond the Usual

A 30% cap on one app's share of UPI is deferred, and PhonePe is at 46.85%

The National Payments Corporation of India^» proposed in November 2020 that no single third-party app^» may process more than 30% of UPI transaction volume. PhonePe's share in September 2025 was 46.85% (NPCI data, quoted from the industry report), and the deadline for apps over the cap has been extended several times, now to 31 December 2026. The rules say enforcement "may only impact" onboarding of new users, with existing users unaffected "to the extent feasible"; the prospectus adds that if the cap is not extended it "may have to moderate onboarding new UPI customers". It then says enforcement "would likely have an adverse effect" on acquiring new customers and "may have a material impact on our business operations, financial performance, cash flows and overall growth trajectory". It notes that NPCI has levied no penalties since the circular. PhonePe also depends on three sponsor banks^» (Yes Bank, Axis Bank and ICICI Bank) to take part in UPI.

A Rs. 5,548.70 crore pass-through for employees' tax sits in the balance sheet and in the cash

To meet the tax that employees owed on exercising stock options, PhonePe arranged for an existing shareholder to buy the shares the employees received. The company received Rs. 5,548.70 crore in September 2025 and paid it to the tax authority on 6 October 2025. It shows as a Rs. 6,538.95 crore payable to statutory authorities (Rs. 643.93 crore at March 2025) and as a financing inflow in the cash flow statement. Total assets rose 27.3% to Rs. 23,178.95 crore from the March 2025 level, and the "bank balances and investments" figure of Rs. 12,159.77 crore includes the money. Taking out the whole amount, the post's own inference since the filing does not say which balances held it, leaves about Rs. 6,611.07 crore against Rs. 6,333.22 crore at March 2025. Read the half's cash and balance-sheet size with that in mind.

Lending partners are guaranteed against defaults of up to 5% of loans disbursed, and PhonePe's lending subsidiary carries it

The filing says its lending subsidiary, PLSPL, entered default loss guarantee arrangements with certain lenders starting in fiscal 2026 and, "in case of defaults by borrowers", "will have to compensate such lenders" up to a specified percentage, not exceeding 5% of the total amount disbursed out of the identified loan portfolio; it says this "may adversely affect our business, financial position and results of operations". At 31 December 2025, a date after the balance sheet, three loan portfolios were covered, with assets under management of Rs. 1,032 crore (INR 10.32 billion). At 30 September 2025 the balance sheet carries a financial guarantee obligation of Rs. 38.50 crore (Rs. 384.97 million), backed by fixed deposits under lien to lenders of Rs. 27.99 crore (Rs. 279.93 million), and the company has calculated an impairment allowance on the guarantees; no amount of the guarantee had been invoked. The sums are small beside Rs. 12,159.77 crore of bank balances and investments, but this is a credit exposure on the line whose revenue rose 108.8%.

The auditor flagged gaps in the accounting record, and some share-allotment records cannot be traced

For fiscal 2023, 2024 and 2025 the statutory auditor's reports carried remarks that the filing lists as modifications: in 2024 the audit-trail (edit log) feature was not enabled in legacy accounting software, and for 2025 the auditor could not confirm that backups of certain applications were held on servers in India or that one outsourced application preserved an audit trail. Separately, the company says some corporate records of past share allotments cannot be traced, and has asked the Registrar of Companies to adjudicate allotments made at prices below valuation reports; the maximum penalty it describes is Rs. 2 lakh for the company and Rs. 50,000 for officers for each allotment. The penalty amounts are small. The post reads the gaps as a sign of thin record-keeping at a company about to be held to listed-company standards; the filing does not say so.

The balance sheet is now gross, so September 2025 cannot be compared with September 2024

Until the year to 31 March 2025 PhonePe presented its payment-gateway accounts net, with merchant money and the bank balances against it kept off the balance sheet. In that year it converted its nodal bank accounts into escrow^» arrangements and became the primary obligor for what is owed to merchants, and during the half it obtained its licence from the Reserve Bank as a payment aggregator^». It now shows both sides: Rs. 3,940.33 crore of escrow balances (Rs. 555.87 crore of it is PhonePe's own unwithdrawn revenue) against Rs. 3,846.36 crore owed to merchants. Comparisons with September 2024 therefore overstate growth in total assets and liabilities, and the escrow cash is not free cash.

A listed stake in another company is carried at Rs. 130 crore and was quoted at Rs. 1,233 crore

The Rs. 434.47 crore exceptional gain came from selling 5% of C.E. Info Systems in June 2025 for Rs. 480.89 crore. PhonePe still holds 13.66% (18.74% at March 2025), recorded under the equity method at Rs. 130.12 crore at 30 September 2025, while the filing gives the quoted-market fair value of that stake as Rs. 1,233.18 crore. The Rs. 1,103.06 crore gap is not on the balance sheet.

Contracted spending is growing: Rs. 354.83 crore for equipment and Rs. 195.66 crore for new leases

Commitments for property and equipment, net of advances, stood at Rs. 354.83 crore against Rs. 240.43 crore at March 2025 (up 47.6%), and commitments for leased assets not yet started were Rs. 195.66 crore, against none at March 2025. Lease liabilities already on the balance sheet total Rs. 716.22 crore (current and non-current). The filing records no contingent liabilities at 30 September 2025.

Sales to Walmart-group companies are 0.6% of revenue

Revenue from related parties was Rs. 22.29 crore, 0.6% of revenue from operations, and the largest was Instakart Services at Rs. 17.03 crore. The ties to the Walmart group show up in who sells in the offer, not in who buys.

Target Valuation Range

PhonePe cannot be priced yet: it has no traded share, so there is no market capitalisation, enterprise value or multiple to set against peers, and this post builds none.

The offer is a sale of existing shares only, with no new shares issued, and the price band is left blank in the document. What the filing does state is below. The share-count basis is the 50.66 crore equity shares outstanding at 30 September 2025 (paid-up equity capital of Rs. 50.66 crore at a face value of Re. 1 each), a point-in-time, as-of-balance-sheet-date count.

The filing's own net asset value^» divides by 51.54 crore shares counted on a fully diluted basis, including vested options. The revenue basis is the six months to 30 September 2025 as reported, not annualised, and full fiscal years where shown.

What the filing states	Figure
Shares offered (all by selling shareholders)	50,660,446, about 10.0% of the 50.66 crore shares in issue
WM Digital Commerce Holdings (Walmart group promoter)	up to 45,942,496 shares
Tiger Global PIP 9-1	up to 1,039,160 shares
Microsoft Global Finance	up to 3,678,790 shares
Net worth, 30 September 2025	Rs. 9,539.02 crore
Net asset value per share	Rs. 185.08
Return on net worth, six months (not annualised)	-15.14%
Weighted average cost of acquisition certified for each seller	Rs. 1,996.80 per share
Fair value per option used for employee-option accounting (discounted cash flow basis)	Rs. 2,337.60
Transfer price per equity share recorded for 17 September 2025 (8,421,725 shares each from Sameer Nigam and Rahul Chari to General Atlantic Singapore PPIL Pte. Ltd., for cash)	Rs. 2,337.60

The last two rows are the same figure. The company's valuers derived it from a discounted cash flow model to book the cost of stock options, and the filing separately records it as the transfer price per equity share when Sameer Nigam and Rahul Chari each transferred 8,421,725 shares to General Atlantic for cash on 17 September 2025; it is also the top of the filing's one-year range of acquisition prices. That is a recorded transfer between named parties, not a price set by buyers and sellers trading in a market, and a single transfer price is not a market price, so the post builds no market capitalisation, enterprise value or multiple from it. For reference only, the closest listed comparable, Paytm, in its post for the same period, traded at about 7.1x enterprise value to annualised quarterly revenue at its 30 September 2025 close (enterprise value Rs. 58,630 crore on annualised Q2 FY26 revenue of Rs. 8,244 crore, using 638,000,000 shares at Rs. 1,123.80). The two companies' half-year revenues are close, and the profit gap is very wide:

Reference	PhonePe	Paytm
Revenue from operations, six months to 30 September 2025	Rs. 3,918.47 crore	Rs. 3,979 crore
Profit/(loss), six months to 30 September 2025	-Rs. 1,444.42 crore	Rs. 144 crore
EV / revenue (Paytm: annualised Q2 FY26; basis above)	none: no price	~7.1x

Paytm's two half-year figures are as presented for it in PhonePe's own prospectus and are on that document's basis; PhonePe's profit includes the stock-pay charge discussed above and Paytm's is its reported profit, so the profit lines are not like-for-like.

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