BENGALURU: In a significant move that underscores a pivotal moment in the Indian fintech sector, high-profile unicorns PhonePe and Razorpay have taken steps to transition into public limited companies. This change marks a crucial step forward in their long-term ambitions to launch initial public offerings (IPOs) in India, which is a rapidly evolving market for digital finance.

Recent regulatory filings indicate that PhonePe approved its conversion from a private to a public limited company on April 3. This transition will involve changing the company's official name from PhonePe Private Limited to PhonePe Limited. However, it is important to note that this change is still pending shareholder approval and must also receive clearance from the Ministry of Corporate Affairs, a critical step in the regulatory process.

Similarly, Razorpay, another major player in the fintech landscape and also based in Bengaluru, has confirmed its own transition to a public company structure. This move is particularly relevant as Razorpay is working on re-domiciling its operations from the United States back to India. A spokesperson for Razorpay elaborated that this transition initiates the compliance process required for public companies, allowing them to adopt necessary governance protocols well in advance of their anticipated IPO, which is projected to occur in about two years.

Both PhonePe and Razorpay are strategically positioning themselves to tap into the burgeoning Indian capital markets. The potential for a PhonePe listing was initially hinted at by Walmart CEO Doug McMillon earlier this year in February, although details regarding the timing were not specified at that time. Razorpay is expected to target its IPO within the financial years of 2026 to 2027, contingent on the successful completion of regulatory requirements and the integration of its US and Indian business entities.

However, PhonePe's journey towards a public listing was previously complicated by regulatory challenges, particularly concerning market share limits imposed by the National Payments Corporation of India (NPCI) on Unified Payments Interface (UPI) services. Recently, the NPCI extended the deadline for capping the market share of individual apps at 30%. This extension provides PhonePe with additional time to enhance its operations and market presence prior to its IPO. Currently, PhonePe commands a significant market share, accounting for nearly 48% of all UPI transaction volumes in India.

In terms of financial performance, PhonePe has demonstrated strong growth, reporting an impressive 74% increase in operating revenue to reach 5,064 crore for the fiscal year 2024, while successfully narrowing its losses to 1,996 crore. On the other hand, Razorpay has also shown robust financial health, achieving revenues of 2,068 crore and a profit of 35 crore during the same period.

The Indian fintech landscape is becoming increasingly competitive, with other players like Paytm and MobiKwik already listed on Indian stock exchanges. Moreover, Pine Labs and PayU are also in the process of preparing for their own IPOs in the coming year, indicating a dynamic and rapidly evolving market that continues to attract significant investor interest.