Best Fintech Stock: MobiKwik vs Paytm

India was predominantly a society that was based on cash. However, in the recent past, digital payments have taken the lead.

Starting from large organisations to small vendors, everyone has a QR code through which consumers are making easy cashless payments.

India's digital payments landscape has seen remarkable growth in the last few years.

The digital transactions volume in financial year 2024 was 159 billion (bn) and is expected grow three times by financial year 2029.

Rising smartphone penetration, government's support to boost digital payments, and enhanced convenience of digital payments are all driving the growth of digital transactions in India.

In this high-growth industry, the two players who made their mark are Paytm and Mobikwik.

Take any app and you're likely to see these two companies already present. Here's a snapshot of the UTS app through which railway tickets are booked and it shows only two options - MobiKwik and Paytm... so you get the idea.

So, let's compare these two giants using different parameters to see which is a better fintech company.

Business Overview

# One Mobikwik Systems

Established in 2009, Mobikwik is a digital banking platform that provides a comprehensive range of financial solutions to merchants and consumers.

The company majorly has two business verticals, payment services and financial services. Its payment services business comprises a merchant payment ecosystem, UPI ecosystem, and credit card payments.

The financial services business comprises affordable credit through EMI and advances.

Mobikwiwk also has investment products such as mutual funds, digital gold, fixed deposits, and peer-to-peer lending.

Moreover, it leverages artificial intelligence (AI) to provide tailored financial insights and helps its users to manage their finances more effectively.

# One 97 Communications

Incorporated in 2000, One 97 Communications operates Paytm, India's foremost digital ecosystem catering to both merchants and customers.

The company's services span across payment processing through wallets, QR codes, and postpaid options, as well as merchant solutions like the Paytm Soundbox.

It also offers financial services such as mobile banking, lending, insurance, and wealth management for consumers and merchants.

Apart from this, it offers commerce and cloud services such as travel and entertainment ticketing, Paytm Mall, and e-commerce.

Paytm recently partnered with global travel technology company Amadeus to offer a more seamless and efficient booking experience using AI.

Particulars	One Mobikwik Systems	One 97 Communications (Paytm)
Market Cap (in Rs billion)*	42.1	635

Source: Equitymaster|* as of 19th December 2024

Between the two companies, Paytm has a higher market cap.

Particulars	One Mobikwik Systems	One 97 Communications (Paytm)
Monthly Active Users (in million)	16	91
Gross Merchandise Value (in Rs lakh crore)	4.7	18.3
Merchant Base (in million)	4.3	40

Source: Company Annual Report

Paytm is also leading with respect to the monthly active user base, merchant base and gross merchandise value as against Mobikwik.

At the end of financial year 2024, Mobikwik's monthly active user and merchant base was 16 million (m) and 4.3 m respectively, whereas for Paytm it was 91 m and 40 m, respectively.

The gross merchandise value of Paytm (Rs 18.3 trillion) is also 4 times higher than Mobikwik (Rs 4.7 trillion).

# Revenue

Mobikwik earns majority of its revenue from the financial services segment (64%) and the rest from the payment services segment (36%).

Paytm, on the other hand, earns majority of its revenue from the payment and financial services segment (80%) and the rest from the commerce and cloud services segment (20%).

If we compare the two companies in terms of revenue, clearly Paytm is leading as its revenue is almost 12x times higher than that of Mobikwik.

Paytm is also leading in terms of revenue growth. In the last five years, Paytm's revenue has grown at a compound annual growth rate (CAGR) of 24.9% as against 19.7% for Mobikwik.

This was on the back of strong growth in user base, merchant base, and its payment services business.

For Mobikwik, adding new products to its digital credit, investments, and insurance verticals has aided revenue growth.

Revenue

Net Sales (in Rs m)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	5-Year CAGR
One Mobikwik Systems	3,565	2,890	5,270	5,390	8,750	19.70%
One 97 Communications (Paytm)	32,808	28,002	49,704	79,801	99,642	24.90%

Source: Equitymaster

# Profitability

If we compare the companies based on the profits, Mobikwik is leading.

In financial year 2024, Mobikwik reported a positive EBITDA and net profit for the first time in 15 years, whereas Paytm is still in losses. However, Paytm's losses have come down.

The primary reason for this is the strong growth in its revenue, and reduction in employee and indirect costs.

For Mobikwik, the growing user base, diversified product offerings especially the distribution of financial products, and prudent cost management practices helped it recover its losses and become a profitable company.

Profitability

EBITDA (in Rs m)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	5-Year CAGR
One Mobikwik Systems	-754	-1,150	-1,320	-780	220	NM
One 97 Communications (Paytm)	-23,698	-13,799	-20,476	-12,215	-5,853	NM
PAT (in Rs m)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	5-Year CAGR
One Mobikwik Systems	-795	-1,110	-1,280	-840	140	NM
One 97 Communications (Paytm)	-29,424	-17,010	-23,964	-17,765	-14,224	NM
Gross Profit Margin	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
One Mobikwik Systems	-21.20%	-39.80%	-25.00%	-14.50%	2.50%
One 97 Communications (Paytm)	-72.20%	-49.30%	-41.20%	-15.30%	-5.90%
Net Profit Margin	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
One Mobikwik Systems	-22.30%	-38.40%	-24.30%	-15.60%	1.60%
One 97 Communications (Paytm)	-89.70%	-60.70%	-48.20%	-22.30%	-14.30%

Source: Equitymaster

# Debt Management

It is important to assess the debt levels of a company to get an understanding of its fixed financial obligations as it ultimately affects is profitability.

Paytm is a debt-free company. It has cash reserves of Rs 38.4 bn at the end of financial year 2024.

Currently, the fintech company's focus is to expand its offerings in both consumer and merchant payments. Apart from this, it is expanding its loan distribution business by continuing to add banks and large NBFCs to its merchant base.

Paytm also plans to focus on improving its core payments business to achieve profitability by 2027.

Moreover, it plans to leverage AI to build AI-first products to help small merchants and micro-businesses and also focus on cost-cutting.

Mobikwik, on the other hand, has a debt-to-equity ratio of 1.4x at the end of financial year 2024. The company recently raised Rs 500 m in debt from BlackSoil Capital, the second debt from the same lender in the last two years.

With its recent IPO, MobiKwik plans to use its proceeds to boost its payments services business and invest in POS machines and soundboxes to improve its merchant loans.

It also plans to focus on new product development through AI and machine learning (ML) by recruiting skilled personnel.

Debt Management

Debt to Equity Ratio (x)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
One Mobikwik Systems	NA	NA	NA	NA	1.4
One 97 Communications (Paytm)	0	0	0	0	0

Source: Equitymaster

# Financial Efficiency

The two ratios that help in assessing the financial efficiency of a company are return on capital employed (RoCE) and return on equity (RoE).

For Paytm, due to consistent losses, the RoCE and RoE are both negative.

For Mobikwik, the RoCE and RoE at the end of March 2024 stood at 9% and 9.2%, respectively.

Financial Efficiency

ROCE	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
One Mobikwik Systems	NA	NA	-57.00%	-17.00%	9.00%
One 97 Communications (Paytm)	-37.50%	-27.20%	-17.80%	-16.20%	-14.20%
ROE	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
One Mobikwik Systems	NA	NA	NA	-46.70%	9.20%
One 97 Communications (Paytm)	-38.00%	-27.80%	-18.20%	-16.70%	-14.80%

Source: Equitymaster

# Dividend

Both Mobikwik and Paytm haven't paid any dividends to their shareholders. As profitability improves, shareholders can expect dividends in the future.

However, there are no signs that the companies will pay any dividends in the near future.

# Valuation

A company's valuation can be ascertained through the price-to-earnings (PE) and price-to-book value (PB) ratio.

These ratios help us estimate the fair value or intrinsic value of a company. They also help us analyse whether a company's shares are overvalued or undervalued when compared to its peers.

The PE of Mobikwik is around 320x, and for Paytm, since the company is in losses, the PE cannot be measured. However, the PB of Paytm is 4.4x, which is lower than the company's three-year average.

Mobikwik's IPO received a lot of investor interest, and its issue was oversubscribed 120 times. Given the company's improving profitability, strong investor interest, and listing gains, the shares are trading at a premium, hence the PE of 320x.

Paytm's shares fell drastically, hitting an all-time low as the company faced the RBI penalty, and its lending business was hit after several lending partners invoked loan guarantees.

Only recently, the company's financials have started to improve, and it's putting government compliances at the forefront.

Valuations	One Mobikwik Systems	3-Year Average	One 97 Communications (Paytm)	3-Year Average
PE (x)	320	NA	NM	NM
PB (x)	NM	NA	4.4	4.7

Source: Equitymaster

Which Digital India Stock is Better: Mobikwik or Paytm?

In terms of absolute revenue, revenue growth, debt management, average monthly transacting users and merchant base, Paytm is leading.

However, in terms of profitability and listing gains, Mobikwik is ahead of Paytm.

Mobikwik's primary focus is to expand its payments business. For this, it is investing in POS machines and soundboxes.

It plans to introduce new products across all its business segments to stay ahead of its competitors.

Paytm, on the other hand, is a leading digital payments app with a huge subscriber base.

The company plans to focus on expanding its offerings in both customer and merchant categories.

It also plans to expand its loan distribution business by adding large NBFCs and banks to its merchant base.

To improve its profitability, it plans to focus on its core payments business and leverage AI to cut costs and improve its product offerings.

However, it is important to note that Paytm has had its fair share of non-compliances ever since its listing.

Recently, it faced a show cause notice from SEBI over alleged misrepresentation of facts during its IPO in November 2021.

Moreover, Paytm Payments Bank faced non-compliance issues in February 2024, and the RBI has prohibited it from accepting new deposits, top-ups, or onboarding new customers. All these are red flags which you must consider before adding any company to your watchlist.

Nevertheless, with the digital payments ecosystem having a promising future, both companies could benefit from it.

It is important to thoroughly access the fundamentals of each company before adding them to your watchlist and also considering corporate governance.

Sustained research must not be compromised, no matter how rosy the prospects may seem.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here.