PhonePe Ltd is evaluating options to restart its initial public offering (IPO) process after the National Payments Corporation of India (NPCI) introduced a 0.4% merchant discount rate (MDR) on large UPI transactions effective next month, according to two people familiar with the matter. MDR is the fee collected from merchants for processing digital payment transactions.
While a share sale is not likely anytime soon, the notification on transaction fee parameters provides structural clarity that facilitates a path to public equity markets, these people said, asking not to be identified as the details are private.
plans to submit updated financial metrics with the Securities and Exchange Board of India (Sebi) before moving forward with a listing, one of these people said.
For context, PhonePe said on 16 March that it had paused its listing plans due to global capital market volatility and geopolitical tensions. According to its latest IPO documents, filed with Sebi on 21 January, the was a pure offer for sale of up to 50.66 million shares, led by major shareholder Walmart Inc, along with other prominent investors such as Tiger Global and Microsoft Corp. Before putting its IPO plans on hold, the company was looking to list at a valuation of $9 billion to $10.5 billion, according to a PTI report.
In its draft IPO papers, the company had said, “Going forward, a carefully structured MDR regime could provide the necessary commercial incentive for ecosystem players to continue investing in innovation, infrastructure, and merchant acquisition.”
It went on to add that while MDR may “marginally increase costs for certain segments, the revenue potential could strengthen the business case for digital payment providers, enabling deeper coverage, improved service quality, and continued growth in adoption across the country. Such changes could also in turn impact our results of operations.”
PhonePe said in response to Mint’s queries, “We won’t be able to share a comment at this time.”
MDR on UPI
MDR, which is regulated by the Reserve Bank of India (RBI), has been 0% for UPI and RuPay debit card transactions since 2020 as the Centre has sought to promote digital payments.
However, the NPCI, which runs UPI, recently introduced a revised MDR framework effective 15 October, offering payment platforms much-needed visibility into their revenue models and unit economics.
Under the new parameters, a 0.4% MDR will apply to person-to-merchant (P2M) transactions exceeding ₹2,000, capped at ₹300 per transaction. However, about 95% of transactions—including low-value payments under ₹2,000 and small merchant transfers—will remain completely free. NPCI also proposed establishing a dedicated fund to accelerate UPI adoption among smaller merchants, while ensuring retail consumers continue to use the service free of charge.
UPI processes billions of transactions every month. Until now, the cost of such transactions and the upkeep of the UPI platform have been borne by banks, NPCI, and payment service providers. Budget 2026 estimated the subsidy payout at ₹2,000 crore for 2026-27, compared with ₹2,196.21 crore in 2025-2026 and ₹1,922.77 crore in 2024-25.
“While it is too early to calculate how much revenue this will bring in for PhonePe, it is still one of the largest players in merchant transactions. A positive MDR directive was something the company was actively looking out for to restart the IPO process,” said the second person cited above.
According to its draft IPO papers filed in January, PhonePe has significantly reduced its losses over the past three fiscal years. Restated losses declined by more than ₹1,060 crore from FY23 to FY25 to ₹1,727 crore.
Meanwhile, revenue from operations increased from ₹2,914 crore in FY23 to ₹7,115 crore in FY25, at a compound annual growth rate (CAGR) of 56.25%. The company also turned adjusted-Ebitda-positive in FY24 and FY25, and reported adjusted Ebit profitability in FY25. PhonePe derives 42% of its revenue from non-payment segments such as merchant services, insurance, and lending.