PhonePe’s Financial Insights in FY26

In FY26, PhonePe, a fintech backed by Walmart, exhibited moderate growth. However, the reported loss of Rs 2,792 crore needs deeper examination. A thorough analysis of the financial statements reveals that a large portion of this loss stemmed from non-cash accounting adjustments rather than from its core operations.

Revenue Sources for PhonePe

PhonePe announced an operational revenue of Rs 7,920 crore in FY26. A significant portion of this revenue was generated from payment services, encompassing transaction processing fees for bill payments, digital gold transactions, and travel bookings. Additional earnings were obtained from platform fees, subscription fees related to payment devices and smart speakers, advertising revenue, and its financial services, which include insurance, lending, stock broking, and mutual fund distribution. Collectively, these sectors contributed Rs 7,619 crore throughout the year.

Moreover, PhonePe secured Rs 286 crore as incentives from the Reserve Bank of India (RBI). Interest income, along with other non-operational gains, elevated the total income to Rs 8,388 crore in FY26.

Expenses Overview

On the expenditure side, employee benefits were the largest expense at Rs 4,386 crore. Of this, only Rs 1,994 crore, around 45%, was allocated for salaries. The residual Rs 2,390 crore was recorded as Employee Stock Option Plan (ESOP) expenses. Notably, Rs 2,197 crore, which is 91% of the ESOP expense, was classified as a non-cash accounting entry. This particular item does not represent an actual cash outflow; therefore, it has been excluded to better understand the company’s core operational performance.

The charges for payment processing reached Rs 1,907 crore during the year. Advertising and sales promotion expenses almost doubled to Rs 956 crore. When factoring in costs related to technology infrastructure, licensing, customer support, legal matters, logistics, and other administrative expenses, the overall expenditure culminated at Rs 10,589 crore in FY26.

Exceptional Financial Elements

PhonePe also disclosed an exceptional loss of Rs 231 crore, primarily due to goodwill impairment. As this too is a non-cash accounting adjustment, it has been excluded from the adjusted loss calculation.

As a result, while PhonePe showed a net loss of Rs 2,792 crore in FY26, excluding the non-cash ESOP expense and the exceptional loss from goodwill brings the adjusted loss to approximately Rs 364 crore. The company also faced a loss of Rs 364 crore from discontinued operations, mainly linked to the closure of the hyperlocal commerce venture, Pincode. Given the limited revenue this business generated, shutting it down could enhance PhonePe’s profitability by removing a loss-incurring segment.

Operational Dominance in the UPI Ecosystem

Operationally, PhonePe solidified its dominance in India’s UPI ecosystem. In June, it processed 10.48 billion UPI transactions, marking the fourth successive month of handling over 10 billion transactions. The company represented 46.15% of the total UPI transaction volume and 49.07% of the transaction value, managing payments amounting to Rs 14.19 lakh crore during the month.

Earlier in the year, PhonePe submitted updated draft papers to SEBI for its anticipated IPO, projected to generate around Rs 12,000 crore (roughly $1.5 billion). Nevertheless, the Walmart-backed entity has put its listing plans on hold temporarily amidst geopolitical uncertainties and fluctuations in global financial markets.