Paytm Outperforms PhonePe in Risk-Reward Analysis, Emkay Global Says

PhonePe Filing Draft Red Herring Prospectus for Primary Market Listing

Key Highlights:

• PhonePe has filed its draft red herring prospectus (DRHP) to raise capital from the primary markets.
• The company reported 238 million monthly active customers (MACs) in H1FY26, with each customer transacting an average of 37 times per month.
• PhonePe's revenue has not proportionately translated into revenue, with the company reporting 17.6% lower revenue in H1FY26 compared to Paytm, excluding discontinued businesses.

Revenue Growth and Monetization:

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• PhonePe has pivoted towards merchant-led monetization and loan distribution to drive growth.
• Around 18% of its H1FY26 revenue came from Real Money Gaming (RMG), rent payments, and PIDF incentives, which are set to be discontinued.
• Excluding these segments, PhonePe's H1FY26 revenue was 17.6% lower than that of Paytm.

Valuation Comparison:

• PhonePe is seeking a valuation of $13 billion, implying 18.7x H1FY26 annualized revenue (excluding discontinued businesses), compared with Paytm's 9.8x multiple.
• Emkay Global Financial Services believes Paytm offers a more favorable risk-reward profile due to its relatively weaker profitability profile and premium valuation.

Financial Performance:

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• PhonePe's revenue per MAU stands at ₹21.4, among the lowest across Indian consumer internet platforms.
• Consumer-led revenues contributed 61.9% to PhonePe's topline in H1FY26, compared with 23.6% for Paytm.
• Merchant revenue contribution rose to 38.1% in H1FY26 from 14.7% in FY23.

Cost Structure and Profitability:

• PhonePe's H1FY26 EBITDA before ESOP expenses stood at ₹2.5 billion, close to Paytm's ₹2.8 billion.
• Higher ESOP costs and depreciation and amortisation resulted in a significantly wider EBIT loss of ₹21.2 billion, compared with Paytm's ₹900 million loss.

Paytm Share Price Performance:

• Paytm shares have failed to reclaim their IPO price since listing, trading nearly 48% below its issue price.
• The stock has delivered multibagger returns of 176% over the past two years.