Flipkart’s PhonePe To Let Users Subscribe To IPOs Through UPI, Becomes First Non-Bank Company To Do So

When UPI had been first introduced in 2016, it was seen primarily as a workaround for the cash crunch that India was facing following the demonetization exercise. But as the payments system has matured and become more mainstream, it’s finding its place in interesting new uses.

The National Payments Corporation of India (NPCI) has allowed PhonePe to let its customers make their bids for Initial Public Offerings (IPOs) through its UPI implementation. This will make PhonePe the first non-banking entity to facilitate these transactions since capital markets regulator SEBI and NPCI had decided to let retail investors bid for IPOs through the UPI platform. However, only banks were given the mandate to facilitate these transactions.

phonepe ipo

“Earlier, the customers had to provide their account details and IFS code to make their bids. The introduction of UPI based payments will make the process much simpler as now they only have to provide their UPI IDs to block their funds,” said Hemant Gala, head of payments, banking and financial service, PhonePe. “Our USP has always been opening up new use cases and this is another such use case. NPCI can harness our distribution network of 150 million users,” Gala said. “The new process has made applying for IPOs extremely convenient for retail investors by increasing efficiency, eliminating the need for manual intervention and logistics at various stages. We look forward to similar collaborations in the future, with a goal to make the process completely digitized,” said Praveena Rai, Chief Operating Officer, NPCI.

As per the process guidelines, investors will have to fill in the bid details in their IPO application form as per the existing process along with their Virtual Payment Address (VPA), also known as the UPI ID, linked with their bank account. Upon validation of block request by the investor, the information would be electronically received by the investor’s bank, where funds equivalent to the application amount would get blocked. “In the first phase, the process will take up to T+6 days for completion, but we are working on bringing it down to three days in phase two, and even lower in the future,” said Gala. This builds upon a feature of UPI 2.0, which was launched last year, which allowed customers to block funds for future transactions acting as a substitute to the existing ASBA process through which bidders earlier blocked their funds.

IPOs are a popular way for many retail investors to invest in the stock markets. Most IPOs in India tend to be oversubscribed, and are then allotted through a lottery. Some enthusiastic participants even end up getting creative to make bids, and place bids through the accounts of their family members in order to maximize their chances. PhonePe has 150 million users, and an IPO subscription service on its platform would not only help existing IPO investors invest more easily, but perhaps also bring in new participants. 

And an IPO subscription option will be a nice addition for PhonePe’s overall product arsenal. PhonePe had started off as a payments provider, but now provides additional features including bill payments, recharges, and even mutual funds investments. PhonePe was recently valued by Morgan Stanley at Rs. 50,000 crore, and it’ll need all the features that it can get to help justify the very impressive number.