IPO-bound PhonePe doubles revenue from its subsidiaries
What's the story
Leading fintech company, PhonePe, has seen a massive jump in revenue from its subsidiaries. The company's insurance, stock broking, and lending businesses contributed ₹615 crore to its overall revenue in FY25. This is a huge jump from the previous fiscal year, when these verticals contributed around 4% of the company's total income. Now, they account for nearly 9% of PhonePe's overall earnings, according to filings with the Ministry of Corporate Affairs.
Business model
Domination in UPI payments business
Despite its diversification into other sectors, PhonePe continues to dominate the UPI payments business with a 45% market share, far ahead of Google Pay and Paytm. The company's main source of payment revenue comes from merchant services such as SmartSpeakers and point-of-sale device subscriptions, transaction-based incentives, and commissions. This has helped PhonePe create a large user base that it now uses to cross-sell financial products like mutual funds, insurance, and credit lines.
Financial challenges
Subsidiaries continue to post losses
Despite the significant increase in revenue contribution from subsidiaries, these verticals continue to post losses. The lending vertical saw a nearly six-fold jump in revenue, from ₹66 crore to ₹378 crore, but losses widened slightly from ₹128 crore to ₹162 crore in FY25. The insurance arm also reported higher revenue of ₹180 crore against last year's ₹108 crore, but saw losses narrowing down to ₹204 crore from last year's ₹247 crore.
Business performance
Stock broking business sees revenue jump but losses deepen
PhonePe's stock broking business, under the Share. Market brand reported a revenue of ₹48 crore in FY25, up from ₹27 crore. However, losses deepened to ₹312 crore from ₹184 crore. The hyperlocal commerce app Pincode saw its revenue more than triple to ₹10 crore, but losses surged sharply to ₹283 crore. The Indus App Store India reported no revenue for both years, but losses widened from ₹123 crore to ₹158 crore.
Growth strategy
PhonePe has deployed around 10 million merchant devices
PhonePe's co-founder and CEO, Sameer Nigam, had said last year that each business has its own gestation period and needs branding, marketing, and cashbacks at the beginning of growth. He also said that the merchant business and payment gateway are generating profitability. PhonePe has deployed around 10 million merchant devices. These verticals fall under the main payments subsidiary, but some divisions have a higher margin than payment processing revenue or income from transaction charges.
Industry trend
Diversification trend in India's fintech space
PhonePe's move to diversify beyond payments is part of a larger trend in India's fintech space. Companies like Paytm, CRED, BharatPe, and Razorpay have been gradually moving into lending, insurance, and wealth management in order to create sustainable income streams.This is because UPI transactions generate little to no direct revenue.