Digital payments platform PhonePe has had a dream run by startup journeys. Founded 10 years ago by ex-employees at ecommerce giant Flipkart, the company is eyeing a valuation north of $10 billion in an initial public offer expected later in 2026.
Fired up by a bunch of engineers, who kept costs on a tight rein while attracting top notch talent, PhonePe has a unique challenge ahead of listing—its books now carry one of the highest stock-linked compensation burdens among Indian technology companies, potentially weighing on profitability.
PhonePe’s combined employee stock options, or Esops, pool across employee and founder schemes totals about 77 million options, after excluding forfeited or lapsed grants.
If the company lists at its last-known private valuation of $14.5 billion, set during a funding round led by existing investor General Atlantic in September 2025, those options could translate into around ₹18,000 crore ($2 billion) in realised and potential equity value over the company’s lifecycle.
Even if the company lists closer to $10.5 billion, a steeply marked down valuation at which the IPO is widely expected, the value of that pool could still be around ₹13,000 crore, or about $1.4 billion.
Of that, the options that still exist today and can convert into shares in the future, could be worth roughly $500-600 million.
Minting millionaires
While other tech firms also use Esops to retain top talent, PhonePe’s rewards to its employees have seeded at least half a dozen “deca-millionaires”, or very high-net-worth individuals, in its top deck.
And thanks to the payments platform's extravagant Esop structure, its top leadership has stuck around from its early Flipkart-acquisition in 2016 to the cusp of its IPO. (Walmart Inc. acquired Flipkart mid-2018 that made the US retailer a significant majority shareholder in PhonePe.)
Chief financial officer Adarsh Nahata, head of strategy and investor relations Karthik Raghupathy, and lending services chief Hemant Gala joined between 2016 and 2018 from the Walmart-Flipkart ecosystem and continue at the helm.
Nahata, Gala, and Raghupathy have been granted roughly 5.1 million stock options—worth about ₹1,193 crore at the last private valuation of about $14.5 billion—based on PhonePe’s updated draft red herring prospectus (DRHP) filed in January.
Some of this wealth has already been realized. During the September funding round, investor General Atlantic bought shares from employees, providing them with an exit. According to a person close to the development, the investor bought back up to 40% of employee shares.
However, the three most highly rewarded managerial personnel could still hold as much as ₹650 crore in potential equity wealth.
Gala could hold roughly ₹232 crore, Nahata about ₹230 crore, and Raghupathy around ₹191 crore.
At a lower $10.5 billion valuation, that combined value could stand at roughly ₹470 crore.
“This is a large, complex, regulated business. There is an obvious need to incentivize the key leadership that has built and scaled the business to its current state. The stability of the management team is a qualitative factor investors will evaluate alongside the financial metrics,” said Siddarth Pai, founding partner, CFO and ESG officer at venture capital firm 3one4 Capital.
The person cited earlier in the story said the company deliberately leaned on equity rather than cash compensation. PhonePe “followed the precedent set by global tech companies, where equity often significantly outweighs base salary”.
Employees, including founders and senior leadership, collectively hold more than 12% of the company on a fully diluted basis. Founders Sameer Nigam and Rahul Chari still dominate the cap table. Together, they could hold ₹7,000-7,500 crore in potential wealth, depending on the listing price.
The remaining Esop pool is granted to the company’s other employees, who numbered over 12,000 as of September 2025.
Mint's emailed queries to PhonePe remained unanswered.
The Esop bill
But that strategy has produced a stand-out Esop expense profile.
The company reported ₹1,812 crore in Esop expenses in the first half of 2025-26, accounting for over 63% of total employee costs of ₹2,869 crore, a surge driven in preparation for its listing.
“One of the reasons for the elevated Esop costs is that it modified some stock plans ahead of its IPO, accelerating certain grants and shortening vesting periods in some cases over the past six months,” said Mohit Agarwal, executive director of tech at financial advisory firm Unaprime Investment Advisors.
Stock-based compensation accounts for roughly 46% of PhonePe’s revenue, far higher than listed peers such as Pine Labs (7.5%), Urban Company (6.4%), Paytm (1.6%), and Swiggy (4.9%), according to a Bank of America report published in March.
It reported ₹3,918.5 crore operating revenue in H1FY26, up over 22.2% year-on-year, while net loss widened to ₹1,444.4 crore from ₹1,203.2 crore a year earlier.
“At a $12-14 billion valuation, even a 2% annual vesting can translate into thousands of crores in stock-based compensation. Accounting optics look large because the base valuation is large,” Agarwal added.
Stock-based compensation, while non-cash, is not costless. Issuing shares to employees dilutes the ownership of existing shareholders. Walmart owns roughly 71%.
Pai of 3one4 Capital, however, said Walmart's high shareholding necessitates a higher tolerance for dilution. “That majority ownership structure calls for structurally higher dilution tolerance compared with widely held startups, requiring PhonePe to maintain a large Esop pool for management and the team.”
High stock-linked compensation can depress reported profits and influence how public market investors evaluate valuation. For PhonePe, the path to profitability could appear longer even as it moves towards listing.
Executives who received stock closer to the IPO may also feel the impact of the listing more directly, Pai added. “The link between stock performance and realized gains is tighter for them than for founders who received stock at incorporation.”
The key post-IPO question is whether the Esops will retain PhonePe’s senior leadership as the company enters a new growth phase as a public firm.