Walmart-backed PhonePe is set to resume its IPO plans with a public listing potentially scheduled between February and March 2027, bolstered by recent government clarity on UPI payment monetization through a revamped MDR framework.
- PhonePe holds approximately 45% share of merchant UPI payments in India.
- New MDR framework applies 0.4% charges on merchant transactions above ₹2,000 starting October 2026.
- PhonePe targets a $10 billion valuation and plans to file IPO papers by end of 2026.
What happened
PhonePe, a leading Indian fintech backed by Walmart, is prepared to revive its IPO plans after a new Merchant Discount Rate (MDR) policy was introduced by the Indian government. This MDR framework reinstates select fees on UPI merchant transactions, reversing the zero-MDR regime that had been in place since 2020. Under the new rules, merchant UPI transactions over ₹2,000 will incur a 0.4% MDR fee starting October 15, 2026, while smaller merchants and P2P transfers under ₹2,000 remain exempt.
With this clarity on revenue potential from UPI payments, PhonePe is aiming to submit updated IPO documentation by the end of 2026, targeting a $10 billion valuation and a public listing between February and March 2027. The company previously filed a confidential IPO and had its draft red herring prospectus (DRHP) approved by SEBI for an offer-for-sale (OFS) only IPO earlier in 2026. The move to monetize UPI transactions is a significant step in PhonePe’s long-term business model after years of forgoing revenue from this channel.
Why it matters
The reinstated MDR framework signals a major shift in India’s digital payments landscape, introducing a sustainable revenue stream for payment service providers like PhonePe. By charging a small fee on high-value merchant transactions, the government aims to balance digital payment adoption incentives with operational cost recovery and innovation funding. This provides fintech players a more predictable environment to invest in merchant acquisition, product innovation, and ecosystem growth.
For PhonePe, which controls nearly 45% of the merchant payment market share on UPI, the new MDR regime is critical to improving its financial performance after years of losses driven by high marketing, employee, and operational costs. The company’s operating revenue rose to ₹7,920.5 crore in fiscal year 2026 but posted a widened net loss of ₹2,792 crore. The revenue from MDR fees can fund further expansion without relying solely on investor capital, strengthening its valuation ahead of the planned IPO.
What to watch next
Stakeholders will keenly follow PhonePe’s IPO filing progress at the end of 2026 and how the market responds to its valuation and financial projections. The company’s ability to translate the new MDR framework into sustainable growth and profitability will be under scrutiny from investors, especially considering its recent widening losses. Further, regulatory evolution around MDR and UPI charges will remain a critical factor shaping the fintech and digital payments ecosystem in India.
PhonePe’s CEO has highlighted that approximately 96% of UPI transactions will remain free under the new structure, aiming to preserve widespread payment adoption while enabling the sector to recover costs on premium transactions. Observers should also monitor competitive responses from other fintech players and banks, as well as how the MDR fees impact merchant and user behavior in this rapidly evolving payments market.