Global broking firm Macquarie has raised key concerns about ESOP costs and revenue concentration for PhonePe ahead of its IPO.
In its recent report, Macquarie highlighted that PhonePe’s high Employee Stock Ownership Plan (ESOP) expenses are a significant drag on its EBITDA margins.
ESOP costs accounted for 46% of PhonePe’s revenue during the first half of FY26, which, as per reports, is the highest among its fintech peers.
“Share-based incentives at PhonePe are high, causing EBITDA to be negative. Additional risks in the form of NPCI capping UPI market share to 30% by 31 Dec 2026 can affect the onboarding of new customers. PhonePe also makes revenues out of selling digital gold, which, as a product, has been under scrutiny from the regulators,” Macquarie pointed out.
According to Macquarie, PhonePe’s listing may serve as a valuation benchmark and potentially trigger a re-rating of its rival, Paytm (One97 Communications).
“PhonePe’s latest valuation as per the last transaction to General Atlantic in Sep 2025 and media reports is around $13-15bn, roughly 60-90% higher than Paytm’s market cap despite being EBITDA negative (PayTM is EBITDA positive). PhonePe’s current revenues could be affected by nearly 20-25% due to a change in regulations as per the DRHP,” said Macquarie.
PhonePe IPO details
Walmart-backed UPI platform PhonePe recently received SEBI approval for its upcoming initial public offering (IPO) and is all set to tap the capital market in the coming weeks.
PhonePe’s issue will comprise entirely of an offer-for-sale (OFS) of 50,660,446 shares.
As per the updated DRHP, Tiger Global and Microsoft are offering up their stakes in the company, while Walmart is choosing to retain its majority stake and selling up to 45.9 million shares.
As per the updated offer document filed with SEBI, PhonePe’s revenue concentration risk is heightened by reliance on revenue sources which have been or carry the risk of being restricted or discontinued.
The Consumer Payments segment contributed 56.14%, 68.84%, 63.34%, 71.56%, and 82.91% of the company’s operational revenue for the six-month periods ending on September 30 for 2025 and 2024, as well as for the Fiscal Years of 2025, 2024, and 2023, respectively. Any interruptions in their Consumer Payments segment could negatively affect their business, financial position, operating results, and cash flows.
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