PhonePe’s recent DRHP has led to lots of information and reporting on its diversification technique.

A more in-depth have a look at the identical UDRHP reveals an organization executing a basic platform playbook that must be contextualised as the corporate appears to be like to go public.

Losses in new companies: Are they an issue?

Allow us to begin with the subsidiary losses. Indus Appstore misplaced Rs 130.37 crore. PhonePe Wealth Broking misplaced Rs 90.37 crore. Insurance coverage Broking posted a deficit of Rs 50.34 crore. Lending Providers reported a lack of Rs 42.54 crore.

These numbers are actual. What’s lacking is the context that makes them significant.

Each single certainly one of these verticals, be it wealth administration, insurance coverage distribution, lending, is in its early scaling section. Lending was launched simply three years in the past. Insurance coverage distribution is focusing on a market the place penetration charges stay among the many lowest on the planet. Wealth administration is competing for patrons who’ve traditionally had little entry to funding merchandise.

Constructing buyer acquisition infrastructure, compliance frameworks, and product capabilities in any of those classes prices cash earlier than it makes cash. That isn’t a warning signal. That’s how new monetary providers companies are constructed.

The extra related knowledge level is trajectory. Income from lending and insurance coverage distribution grew to 11.55% of whole income in FY25, up from 6.76% the 12 months earlier than, with absolute income greater than doubling to Rs 452 crore.

Non-payment companies as a complete grew 208% year-on-year. These aren’t the expansion charges of a diversification technique falling flat. They’re the expansion charges of a method gaining momentum exactly because it absorbs its heaviest funding prices.

The price of constructing a enterprise can’t be equated with the failure to construct one. The 2 aren’t the identical.

The service provider numbers deserve a extra sincere studying

The expansion in Month-to-month Energetic Retailers (MAM) 11.43 million in FY23, 11.45 million in FY24, 11.31 million in FY25, and 11.11 million within the first half of FY26 should be examined carefully.

First, some perspective on what the quantity really signify. PhonePe’s service provider community spans 98% of India’s postal codes. The query of whether or not the corporate has saturated the readily addressable service provider base in its present kind is a professional one. However saturation at near-total geographic protection is a really completely different downside from failing to develop. It means that the legislation of huge numbers is doing what it at all times does.

Second, and extra importantly, Month-to-month Energetic Retailers is a depend metric, not an financial metric. The related query will not be whether or not the quantity is rising, however whether or not the income generated per energetic service provider is rising.

As PhonePe rolls out EDC machines, smart speaker QR programs, billing and POS options, and finally enterprise lending merchandise to its current service provider base, monetisation per service provider is the variable that drives monetary efficiency — not the uncooked headcount. The prospectus is clear about this shift in focus, from increasing the service provider base to deepening its industrial relationship with the bottom it already has.

Advertising spend and the Funding-leverage debate

The UDRHP mentions a near-50% rise in promoting and gross sales promotion bills within the six months ended September 2025, alongside a compression in adjusted EBITDA margin from 15.74% to six.48% in the identical interval. Ought to this be seen as proof that increased advertising and marketing spend will not be delivering working leverage?

What this framing ignores is that the primary half of a monetary 12 months, wherein an organization is ramping advertising and marketing spend forward of an IPO and concurrently investing in new product classes, will not be the proper window by which to evaluate the long-term relationship between advertising and marketing prices and working margins. Half-year margin snapshots throughout an energetic funding section are inherently noisy.

The total-year FY25 image is extra instructive. The Adjusted EBITDA reached Rs 1,477 crore and adjusted revenue after tax greater than tripled to Rs 630 crore, on income progress of 40%. That could be a enterprise producing and rising working revenue whereas concurrently absorbing the prices of constructing 4 or 5 new enterprise traces. It isn’t an image of promoting spend operating forward of outcomes, however it’s a image of an organization selecting when to press the accelerator.

Expertise Prices: Infrastructure, not overhead

The UDRHP mentions Rs 4,000 million in semi-annual expertise infrastructure. For a platform processing 9.8 billion transactions in a single month, infrastructure is the product. Dependable, low-latency funds processing at that scale requires sustained capital funding.

PhonePe’s argument that constructing proprietary knowledge centre infrastructure reduces long-run prices will not be a speculative declare, it’s the similar rationale pursued by each large-scale expertise platform that has moved away from third-party cloud dependency. The choice, underinvesting in infrastructure at 9.8 billion month-to-month transactions can be the actual danger to flag.

What a vital studying of PhonePe’s prospectus misses is the coherence of the mannequin. Funds ship 300 million month-to-month active users and day by day recurring engagement at zero marginal price to the consumer. That engagement is the acquisition engine for each monetary providers product the corporate sells.

Insurance coverage, lending, and wealth administration merchandise distributed to a pre-existing, extremely engaged consumer base carry structurally decrease buyer acquisition prices than standalone opponents and that price benefit compounds because the consumer base grows.

The corporate will not be claiming it has completed constructing this mannequin. It’s claiming it has constructed the muse and is within the strategy of monetising it. The proof is within the numbers.

With a 208% progress in non-payment income, tripling PAT, and a lending and insurance coverage section that has moved from near-zero to over 11% of income in three years, means that declare has advantage.

Public market buyers will in the end resolve what PhonePe is value. Studying a DRHP will not be the identical as understanding a enterprise. In PhonePe’s case, the hole between these two issues is exactly the place the funding thesis lives.