MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing.

India's fintech space is gaining traction in the initial public offering (IPO) market.

Recently, two fintech companies Paytm and Policybazaar raised funds worth Rs 239 bn. Now another fintech company is ready to make its debut.

MobiKwik, one of India's largest mobile wallets and Buy Now Pay Later (BNPL) players, is set for its IPO.

The total issue size of the IPO will be Rs 19 bn. Of this, Rs 15 bn will be a fresh issue while the remaining Rs 4 bn will be an offer for sale.

The category wise details along with the dates are yet to be announced. The book running lead managers of the IPO are ICICI Securities, BNP Paribus, Credit Suisse, IIFL Securities, and Jefferies India. Link Intime India is the registrar of the issue.

Objective of the issue

The company plans to use the funds collected through the issue for organic growth initiatives, inorganic growth, and general corporate purposes.

About MobiKwik

MobiKwik (formerly known as One MobiKwik Systems) is a fintech company and is among the largest mobile wallets in India.

The company was incorporated in 2009 as a mobile wallet with the aim to make digital payments easy.

It later expanded its presence to bill payments, online and offline retailers, money transfers through UPI, bank transfers, etc.

In 2012, it also launched an online payment gateway called Zaakpay.

Recently, the company ventured into credit services to take advantage of the low credit card penetration in India.

It launched a BNPL product called MobiKwik Zip that combines fast-growing mobile payments with the benefits of credit.

Through this product, the company aims to offer credit services to the middle class by offering credit up to Rs 30,000 at zero cost for paying bills, shopping, and much more.

MobiKwik has a customer base of over 101 m registered users and over 3 m in billing, retail, and ecommerce partners.

The company also recently received unicorn status as it reached a valuation of US$1 bn. This came after a secondary sale of an employee stock options plan (ESOP) to employees.

Key Strengths of the Company

• MobiKwik is one of the India's largest mobile wallets and a BNPL players in India. The company enjoys a large user base with a low cost of conversion.
• It has a strong network across business verticals. An increase in end users, merchants, lending partners, or banks will ultimately benefit all stakeholders.
• The company has a strong customer brand with good brand recall.
• Innovation and technology drive the company. Hence its products are personalised, intuitive, user friendly, and have high engagement.

Challenges

• Intense competition in the fintech industry can adversely affect MobiKwik's customer base, operations, and the company's financial condition.
• If MobiKwik fails to attract, engage, and retain its users and merchants, its operations can be negatively affected.
• The company deals with highly confidential user data. A security breach or an attack on the platform can damage their reputation, brand name, and hence its operations.
• MobiKwik's credit assessment and risk management systems might not effectively identify risks in BNPL credit, leading to default payments by the users.
• The company has faced losses in the last three fiscal years (2019-2021). There is a considerable risk that it might not earn profits in the near future if it cannot maintain or keep up its growth levels.
• If the company doesn't keep up with the technological changes, it can become obsolete.

Financial Snapshot

In the last three years, MobiKwik's revenue growth has been quite unstable.

The company's revenue declined 18.3% year on year (YoY) in financial year 2021 while it increased more than 100% YoY in the financial year 2020.

However, the number of registered users has increased consistently. The company has seen an increase of 22.2% in registered users in the year 2021. In 2020, the number of registered users increased 29.3%.

The company's expenses have also been unstable. In financial year 2020, total expenses increased 50% while in 2021, they fell 11%.

Overall, the company has incurred losses in the past three fiscal years. Its net loss margins have also been over 20%.

Rs m	2018-2019	2019-2020	2020-2021
Revenue	1,602	3,699	3,023
Revenue Growth %		130.80%	-18.30%
Expenses	3,021	4,545	4,041
Net Profit	-1480	-999	-1,113
Net Profit Margin	-92.30%	-27.00%	-36.80%
EPS	-31	-20	-22
Net worth	-16	-309	-200
Total borrowings	864	765	605
Registered Users (m)	64	83	101
Customer Acquisition Cost (Rs)	9.4	13.3	11.5

For more details, check out MobiKwik Systems Red Herring Prospectus.

Is the IPO frenzy a bubble?

In its State of Indian Economy report, the Reserve Bank of India (RBI) said that 2021 could be India's year of IPOs.

And it sure seems like it.

So far, India has seen close to 45 IPOs, and 20 more IPOs are expected to hit the market in 2021.

These IPOs have raised over Rs 660 bn as of October 2021. This number is expected to reach Rs 1 tn by the end of the year.

So, is the sizzling IPO market just a bubble?

Loss-making firms are rushing to get listed in the market with pricy valuations. Investors are equally enthusiastic about participating in this IPO mania.

One of the main reasons investors are rushing to participate in the IPO market is to get hold of the tech companies in India. With rapidly evolving technology, investors believe these firms can be the next big tech giants in India.

But only time can tell how these loss-making firms will evolve in the future.

If you are participating in this IPO mania or contemplating it, make sure you understand what you are doing.

Take a look at the company's financials and understand the business before taking the leap.

Happy Investing!