Mobikwik seeks valuation of around $250 million, cuts issue size

The company, headed by husband-and-wife duo Bipin Preet Singh and Upasana Taku, has reduced its fundraising target to ₹572 crore, following the Securities and Exchange Board of India’s (Sebi’s) approval in September to raise ₹700 crore.

“The markets were in an amazing bull run right up to August or September. If we had got the Sebi approval earlier, we might have done something different then,” Taku told Mint on the sidelines of its initial public offering (IPO) press conference in Mumbai on Friday.

Taku added that along with volatility in the market, changes in the fintech landscape, including Reserve Bank of India (RBI) sanctions against several companies in the sector prompted the company to make the adjustment in the issue size.

Allocation of IPO proceeds

Founded in 2009, MobiKwik is a mobile wallet and financial services company. Through its payments business that makes up about 36% of revenue, it allows retail customers and merchants to send and receive money and pay various utility bills.

It also offers digital credit, investments and insurance products such as MobiKwik ZIP—its buy now pay later (BNPL) credit, and ZIP EMI that provides personal loans, merchant cash advances, wealth management and insurance distribution. This segment made up about 64% of MobiKwik’s revenue as of FY24.

Of the IPO proceeds, the company is allocating ₹150 crore towards financial services, and ₹135 crore in the payments services business. The company has allocated another ₹107 crore of the proceeds for research and development in artificial intelligence, machine learning, product and technology, while the rest is for capital expenditure in the payment’s devices business.

Growth plans, challenges

For MobiKwik, the next phase of growth will come from capturing the Unified Payments Interface (UPI) market, which it is attempting to do with the help of Pocket UPI, which is wallet over UPI product and RuPay credit card operating over UPI, within the consumer payments business, Taku told Mint.

“I don’t want to have a 10% market share in a huge UPI market where I don’t make money. I’m happier focusing on a smaller piece of the UPI pie—one where nobody else is focusing but where there is revenue to be made,” added Taku. Back in 2023, the National Payments Corporation of India (NPCI) announced a 1.1% interchange fee or merchant discount rate (MDR) on UPI payments via wallets, while currently, an MDR of 2% is levied on UPI-linked RuPay credit card transactions over ₹2,000. Taku stated that the company will be scaling down its BNPL credit product due to negative sentiment surrounding the segment, which has affected its partnerships with cautious banks and non-banking financial companies.

MobiKwik, meanwhile, is also investing to grow its merchant payments business acquiring new merchants and processing payments for this segment.

“In financial services, we will be building up the insurance vertical and the savings vertical, where we will bring more products,” she added.

The fintech company clocked a net profit of about ₹14 crore in FY24, the first since its inception in 2009, following a loss of ₹83.8 crore in the previous financial year. Total income grew nearly 59% to ₹890.32 crore in FY24.

During the first quarter of the current fiscal year (Q1 FY25), MobiKwik reported revenue of ₹ 342.2 crore, with a marginal loss of ₹6.6 crore for the period.

When questioned about the dip in valuation impacting existing captable, Taku said, “People who have invested at a higher valuation, including promoters, are taking a deviation. After the listing, if the company rerates and performs well, they will have the option to act accordingly,” she added.

To be sure, the offer will consist entirely of a fresh issue of shares, with no offer-for-sale component having no material impact on the existing investors as of now.

Broader trends

According to a recent report by Axis Capital on 3 December, India’s IPO market has seen a slowdown in subscriptions over the past two months, driven by weak market sentiment and disappointing listing performances, says a report by Axis Capital.

Meanwhile, several fintech companies have delayed their public listing on the back of RBI’s actions against some prominent players in the space. “You need courage to list in a challenging market,” added Taku.

The payments and financial services company was also caught up in the storm when the RBI barred peer-to-peer (P2P) exchanges from offering instant withdrawal feature in September, a segment where MobiKwik operated in with Lendbox.