Nervous about going public with 30% market-share cap looming: PhonePe’s Sameer Nigam

A potential 30% cap on the market share of any company processing payments via the Unified Payments Interface (UPI) is a roadblock to PhonePe's public listing, its founder and chief executive Sameer Nigam said during a discussion at the Global Fintech Fest (GFF) in Mumbai on Wednesday.

“As far as going public is concerned, the market cap overhang is definitely a problem for us. I feel nervous going into the market where's a 30% market cap lurking or looming,” he said.

The National Payments Corporation of India (NPCI), the quasi-regulator, proposed a 30% cap on market share for third-party app providers (TPAPs) first in November 2020. The original 31 December 2022 deadline for the cap's introduction has now been extended to December 2024.

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“I don't want to go public based on today's numbers and market share until I can actually look you in the eye and say, buy my shares. This company is going to be able to grow from here,” he said.

The PhonePe founder has discussed his plans to take the company public in 2025 or 2026 once it reports net profit.

His latest comments come days after the fintech firm turned operationally profitable, recording a profit after tax of ₹197 crore, excluding Esop costs, in the fiscal year 2023-24, compared to a loss of ₹738 crore a year earlier. PhonePe's revenues rose 74% to ₹5,064 crore during the year.

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“Profitability was one big milestone, second was diversification, and likely we've done well in both those fronts… Beyond that (market cap) is just like any other company, just the preparedness for the IPO (initial public offering) and quarterly numbers closure. That's the operating stuff. As a company, culturally and governance-wise, we're getting very close,” added Nigam during the session on opportunities and challenges for fintechs in India.

The sector has encountered a significant setback in recent years. The global funding winter has led to a dramatic decline in investments for Indian fintechs. According to a Tracxn report, funding for these firms plummeted by 59% to $795 million in the first half of 2024 from $1.93 billion in the year-ago period.

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Nigam stressed that the company is holding discussions with the NPCI and regulators to allay concerns. “We are trying to ensure we do everything in our part to satisfy the NPCI and the regulators. If we manage to solve those, and then the cap goes, I think we have run out of excuses not to go public.”

The Bengaluru-headquartered firm, founded in 2015, has raised close to $850 million from marquee investors like Walmart, General Atlantic and Ribbit Capital. 

Before founding PhonePe, Nigam served as senior vice president of engineering and vice president of marketing at Flipkart. His journey with Flipkart started in 2011 when the company acquired his startup, Mime360, a digital media distribution platform.