Fintech IPO: Mobikwik Systems prepares for listing

India’s mobile payment user base has grown to be the second-largest in the world after China. Within mobile payments, wallet payments are expected to grow by three times to approximately $60-$70 billion by fiscal 2026.

Mobikwik Systems Ltd, a digital payments firm, recently filed a draft red herring prospectus for an IPO of up to ₹1,900 crores with SEBI. The IPO includes a fresh issue of shares worth ₹1,500 crores and an offer of the sale worth ₹400 crores by the existing shareholders.

The company is seeking a valuation of $1 billion from the offering and, if the pre-IPO placement is completed, the number of equity shares issued following such a placement will be reduced from the fresh issue.

 Mobikwik plans to utilize at least 40% of the net proceeds towards funding organic growth initiatives. The remainder would be utilized towards investment in tech teams and R&D to improve the performance of the platform and user experience.

The BNPL model

Mobikwik operates through two verticals – Mobikwik Wallet, which is one of the largest in India; and Buy Now Pay Later (BNPL), a credit facility based on mobile wallet gross merchandise value. Credit-based BNPL models like Mobikwik Zip and Zip EMI provide access to credit for underserved customers and enable them to transact for multiple use cases on merchants across the wallet network.

In 2018, the Gurugram-based company acquired Clearfunds, an online mutual fund platform to offer wealth tech products. Mobikwik has partnered with 36 asset management companies, including UTI Mutual Fund, DSP, and Aditya Birla Sun Life Mutual Fund for investment management solutions. Investments on this platform can be done with relatively low amounts, starting with ₹100.

The digital payment giant has plans to diversify into other products such as fixed deposits and National Pension Scheme. The company also has a partnership with SafeGold to enable trading of digital gold, as well as to bring benefits such as instant liquidity, higher selling price, and ease of purchase to users.

Financials

For the year ended 31 March 2021, Mobikwik had total revenue of ₹3.02 billion and total assets worth ₹4.23 billion. However, the company faced a loss of ₹1.1billion or ₹22.18 per share.

Meanwhile, Mobikwik’s credit underwriting and risk management systems may not be able to effectively assess or mitigate the risks of BNPL credit enabled through its platform. The company may experience default in payment obligations, which could adversely affect its business, results of operations, and financial condition.