PhonePe is inching closer to Dalal Street. The digital payments giant has now filed its updated Draft Red Herring Prospectus after securing approval from the Securities and Exchange Board of India, putting its long awaited initial public offering firmly back in focus.
The global brokerage house Bernstein, in its latest report, has given its analysis about PhonePe ahead of the proposed initial public offering (IPO).
Let’s take a look at what is the brokerage say on this upcoming IPO –
Bernstein on PhonePe: Direct beneficiary of digital payment push
According to the brokerage report, PhonePe today operates one of the largest consumer financial platforms in India. The company has more than 230 million monthly active users and its payments engine processes close to $1.8 trillion worth of transactions annually, a scale that Bernstein notes places it “alongside global payment majors.”
As per the brokerage report, PhonePe controls nearly 49% of the UPI market.
Furthermore, Bernstein in its report noted PhonePe as “particularly interesting as the largest player in the UPI ecosystem,” adding that the platform has been a direct beneficiary of India’s rapid shift towards cashless payments.
Bernstein on PhonePe: Payments remain the hook
According to the Bernstein report, payments act as the core customer acquisition tool. This brings users and merchants onto the platform before any serious monetisation begins.
The brokerage report noted that in the first half of the financial year 2026, PhonePe generated around Rs 40 billion in revenue, with nearly 82% coming from payments. Lending and insurance distribution together contributed only about 12%.
Bernstein pointed, “PhonePe prioritised scale across users, merchants, and payment volumes before focusing on monetization.”
Bernstein on PhonePe: Monetisation is improving, but slowly
One of the key points of Bernstein’s analysis is that PhonePe’s monetisation journey is still evolving.
The report noted that the UPI payments in India are regulated as a zero Merchant Discount Rate product. This means that the platforms cannot charge merchants directly for transactions. This limits immediate revenue potential.
Bernstein further noted that over the twelve months ending September 2025, PhonePe’s revenue rose to around Rs 7,800 crore. At the same time, revenue earned per unit of payment value increased to 4.9 basis points, compared with 3.8 basis points in FY23.
According to the brokerage report, this improvement has been driven by diversification. Non-payment businesses now account for about 18% of total revenue, up from just 7% two years earlier.
The report adds that this shift has been helped by higher merchant-linked revenues, including the sale of payment devices and the cross-selling of lending products. Bernstein also clarified that “a large part of the revenue from customers is actually collected from merchants or financial services partners,” with only limited fees charged directly to users.
Bernstein on PhonePe: Profitability is closer, but not here yet
On profitability, Bernstein strikes a cautious tone. PhonePe has achieved adjusted EBITDA breakeven. However, it continues to report losses at the Profit Before Tax level.
The brokerage report also highlighted regulatory headwinds that have slowed growth. Changes related to credit card based rent payments and restrictions on real money gaming have reduced revenue contribution from certain segments.
These segments accounted for nearly 29% of revenue in FY23, but only 15% in the first half of FY26.
Bernstein on PhonePe: How PhonePe compares with Paytm
Comparisons with Paytm are inevitable, and Bernstein addresses this directly. According to the report, PhonePe’s revenue in the first half of FY26 is broadly similar to Paytm’s, despite PhonePe having less exposure to lending and other high-margin services.
Bernstein noted that while PhonePe leads clearly on consumer scale and UPI dominance, Paytm is ahead on monetisation and profitability. “Paytm leads on monetisation and is further along in its profitability journey,” the report said, pointing out that Paytm has already achieved Profit After Tax breakeven.
Conclusion
Overall, for PhonePe, the brokerage believes improving monetisation trends and cost discipline are important positives, but also flags that profitability will depend on how effectively the company expands beyond pure payments.