PhonePe had 12,338 employees as of September 2025, and its employee stock-option programme could give a larger pool of employees an opportunity to participate in the value creation from a potential public listing.
Walmart’s latest annual filing shows that its ownership in PhonePe fell from approximately 84% as of January 31, 2025, to about 73% as of January 31, 2026, following the vesting and exercise of certain employee-held options, including some previously vested awards.
“During fiscal 2026, PhonePe modified certain share-based payment arrangements in contemplation of a potential IPO. Following the modification, certain PhonePe employee-held options were vested and exercised, including certain previously vested awards,” Walmart said in its annual report.
The development means a portion of the value created ahead of the IPO has already begun flowing to employees through the stock-option programme, while also diluting Walmart’s stake in the company.
PhonePe’s IPO documents provide further detail on employees exercising options ahead of the proposed listing. Under the PhonePe Stock Option Plan, eligible employees were allowed to exercise vested options before the company’s listing. A total of 47.09 lakh vested options, including outstanding cash-settled options, were exercised under the early-exercise arrangement.
The early exercise was part of a broader employee stock-option arrangement approved by the company’s board in August 2025. PhonePe’s filings show that the exercise was settled on a net basis, with a portion of the options withheld to meet employees’ tax obligations and the balance settled through the issue of equity shares.
The modification of PhonePe’s share-based payment arrangements also resulted in Walmart recording a $0.7 billion non-cash charge, primarily related to previously unrecognised share-based compensation expense. Walmart said the charge was triggered by the modification of certain PhonePe share-based payment plans in anticipation of a potential IPO.
Walmart’s broader share-based compensation expense stood at $3.6 billion in fiscal 2026, up 30.1% from $2.8 billion in fiscal 2025 and compared with $2.1 billion in fiscal 2024.
However, in an interaction with CNBC-TV18, CEO Sameer Nigam declined to comment on the timing of the listing.
“MDR certainly makes for better economics, but I won’t commit on whether the IPO will happen in FY27,” Nigam said.
The latest dilution follows an earlier decline in Walmart’s PhonePe holding from approximately 89% to 84% in fiscal 2024, after the payments company raised $0.7 billion through a fresh equity funding round. Walmart’s filings confirm the earlier dilution followed new rounds of equity funding in PhonePe.
PhonePe’s IPO plan envisages an offer for sale by existing shareholders rather than a fresh issue of shares. As per the latest updated draft prospectus, promoter WM Digital Commerce Holdings, owned by Wal-Mart International Holdings Inc., held 71.77% of PhonePe and proposed to sell up to 4.59 crore shares, equivalent to 9.06% of the company’s paid-up equity.
For PhonePe employees, however, the potential IPO represents an important monetisation opportunity. The exercise of stock options ahead of a listing allows eligible employees to participate directly in the value created as the fintech company transitions from a privately held business to a publicly traded one.
