The value of stock appreciation rights (SARs) allocated to PayU India employees has taken a significant hit over the past financial year, reflecting the broader struggles of the fintech company that has been a laggard among the portfolio companies of its Dutch owner Prosus.

According to internal data reviewed by The Head and Tale, the fair value of SARs under multiple PayU-linked schemes has plunged sharply by 30-60% year-on-year in FY25.

For instance, under the MIH Payments Holding BV Scheme – which exclusively pertains to the India payments business – the SAR value has declined from $79.31 in FY24 to $50.21 in FY25. Another scheme, the India Credit Scheme, tied to PayU's lending vertical, witnessed a more dramatic fall, from $37.39 to just $14.31 during the period.

Moreover, the newly introduced “MIH Payments (new awards)” – which combines both India payments and credit businesses – started with a SAR value of $72.99 in FY24. That slipped to just $42.42 in FY25.

Similar declines are visible in broader schemes too, such as the Red Dot Payments (RDP) Scheme, where SAR value slid from $275.91 to $169.85.

SARs are a type of incentive that lets employees earn money based on how much a company’s stock increases in value without needing to buy the stock. Interestingly, Jamie Dimon, the CEO of American financial services giant JPMorgan was also granted SAR in 2021 to persuade him to continue to lead the lender for another "significant number of years". However, SARs are granted at a fixed price and the payout only happens if the stocks gain in value.

“SAR is directly proportional to how the company is growing. This year its value has dropped which means employees could not cash out anything. So, that’s why employees are very sceptical whether PayU is growing or degrowing or are they not able to match up with what’s happening in the outside world,” a person aware of the matter told The Head and Tale.

The decline in SARs' value has created a crisis of confidence among PayU's employees, particularly as the company shifted from granting Prosus restricted stock units (RSUs) to PayU India-specific SARs.

Unlike RSUs, which provide value even when stock prices decline, SARs only pay out when share prices appreciate above the grant price.

The company has been giving Prosus’ RSUs to some junior-level employees, claimed two people; but the majority are now given India-specific SARs. “Some 15-20% employees are getting global Prosus SARs and RSUs, while 80% are being given just PayU India SARs,” one of the persons cited above said.

Another person pointed to mounting dissatisfaction among staff over the declining SAR value, appraisals and delayed IPO, “There is no clarity when PayU will go for an IPO, and whether the SAR value would appreciate.”

These decline in SAR value suggests a shrinking internal valuation for the PayU India business and other associated global units, especially in light of recent business performance. 

PayU India was planning to go public at valuation of $5 billion to $7 billion.

The appraisal announcement at PayU India got delayed by a few weeks this year, according to people familiar with the development. The delay happened because of internal back-and-forth over large bonus payouts proposed for senior executives – which the global Prosus team reportedly did not approve at first.

“Everything PayU proposes to employees has to be approved by the Prosus team. The internal chatter is that Prosus was against approving bonuses since PayU India has not met its financial targets for FY25. After sending the proposal more than once, the appraisal was approved, but it’s still unclear whether senior management bonuses were passed,” a person said.

The average increment across units – payments, credit, and Wibmo (California-based payment and security company PayU had acquired in 2019) – was around 7-8%, similar to the previous year.

According to people familiar with the matter, PayU India’s internal revenue target remains unchanged at around $700 million in FY26 as well, mirroring last fiscal year’s goal.

PayU India’s revenue rose 21.4% year-on-year to $669 crore (Rs 5,573 crore) in FY25, as per the latest annual report released by Prosus. However, the company’s losses jumped 38% to $44 million (Rs 366 crore) in FY25. The core payments business grew just 12%, reaching $498 million (Rs 4,149 crore) in FY25.

In a townhall held two weeks ago to announce appraisals, the PayU India leadership acknowledged the challenges of growth and losses faced by the company.

“They said that revenues have stagnated or degrowing, without specifying the numbers because they are just scared what if it is leaked to the media,” said a person directly aware of the details.

“They clearly said our revenues are not growing, but our net margins are growing – that is somewhere around 5%,” the person added.

Responding to a detailed query from The Head and Tale, PayU spokesperson said, "At PayU India, we remain focused on long-term value creation for all stakeholders, including our employees. We have realigned our LTI (Long term incentive) plan as part of a standardised approach being taken across all Prosus companies where compensation is aligned to cultural behaviour and anchored to business performance.  Both our payments and credit businesses are growing steadily, supported by stronger operational efficiency. These improvements are helping us move toward sustainable profitability."

"The FY25 performance and rewards cycle has been successfully completed as per June timelines," the spokesperson added, without revealing whether bonuses of senior executives are approved by Prosus or not.

PayU has been placing heavy bets on its acquisition of Mindgate Solutions to revive growth across its payments, credit, and Wibmo verticals. Internally, however, expectations are tapering off.

In March this year, PayU India acquired a 43.5% stake in Mindgate for $68 million, and it added another 26.5% stake to raise its ownership to 70% for $72 million, as per the latest annual report of Prosus. The Head and Tale had exclusively reported earlier this year that PayU is picking up a strategic stake in Mindgate to boost capabilities in UPI 2.0 and real-time payments.

Notably, PayU India has an obligation to purchase the remaining 30% ownership interest in Mindgate from the non-controlling shareholders under a put option arrangement exercisable during a specified future period, the annual report showed, ultimately giving full ownership.

While employees initially believed the Mindgate acquisition would unlock new business opportunities, internal conversations in recent weeks suggest otherwise.

“In a recent meeting with the UPI product team, the business team reportedly expressed doubts about the value Mindgate brings to the table,” a source aware of the discussions said. “Suddenly discussion started happening around how Mindgate is just an investment – and this doesn’t mean they are going to work for us.”

The source also noted that Mindgate "might be useful as backend infrastructure."

In FY24, Mindgate had reported revenue of Rs 260.7 crore as compared to Rs 195 crore in FY23 and registered a net profit of Rs 23.2 crore as compared to Rs 6.5 crore, as per Tracxn. In FY25, its estimated revenue was Rs 333 crore and net profit was Rs 41.6 crore, as per the annual report. Back of the calculations show that Mindgate would have accounted for around just 6% of the PayU India’s revenue in FY25.

“PayU is working on getting revenue. But again, for revenues, to what extent are they willing to go is the next question everyone is asking,” stated the source.

On Mindgate acquisition, PayU spokesperson said, "We are working with Mindgate to improve our UPI Success rates and to offer innovation faster to our customers."

With internal performance stagnating and strategic bets yet to bear fruit, PayU’s long-anticipated IPO now appears to be further delayed.

An executive familiar with internal discussions said, “There is no IPO in sight –-  at least till June next year.”

Few months back, in a global Prosus review meeting of portfolio companies, the slide on PayU India stood out – for all the wrong reasons, sources suggest.

PayU India was the only portfolio company singled out with a remark that it was struggling and had been given six months to turn things around.

CEO Anirban Mukherjee, one of the longest-serving CEO at PayU India, is under intense pressure to deliver. As PayU’s valuation keeps slipping, the IPO horizon continues to recede.

Meanwhile, other fintech companies in India such as Pine Labs and Groww filed their draft papers for their IPO in the past months. Walmart-owned PhonePe is expected to file papers for its IPO by the end of next month.

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