MobiKwik: A Comprehensive Analysis in the Wake of Its 2024 IPO

MobiKwik, a frontrunner in India’s digital payment landscape, is taking a significant step in 2024 by pursuing an Initial Public Offering (IPO) aiming to raise ₹7,000 million ($84 million). This move marks a strategic pivot for the Gurugram-based fintech startup, symbolizing its resilience and adaptability in the face of past challenges and its readiness to capitalize on future opportunities.

Evolution and Strategic Shift

Founded 15 years ago by Bipin Singh and Upasana Taku, MobiKwik has journeyed from being a mobile wallet provider to becoming a comprehensive online financial services platform. It now offers a diverse range of financial products including digital payments, credit, investment, and insurance services​​. The company’s strategic evolution is reflected in its decision to file for an IPO of a reduced size compared to its initial $250 million target in 2021, adjusting its approach in response to market conditions​​.

Investors

Among its backers, notable names include the Abu Dhabi Investment Authority (ADIA) and Sequoia Capital, both of which have played pivotal roles in supporting MobiKwik’s growth trajectory​​.

The company has successfully raised funds from a diverse group of investors, reflecting confidence in its business model and growth prospects. For instance, a funding round in June led by ADIA catapulted MobiKwik’s valuation to about $700 million. This investment round was a testament to the investors’ belief in MobiKwik’s potential within the digital payments and financial services space​​.

MobiKwik’s investor roster also includes other prominent names such as Cisco Systems, Net1 Applied Technologies Netherlands BV, Tree Line Asia Master Fund (Singapore) Pte, and American Express, highlighting the wide-ranging support from across the global investment community. These investments have not only provided MobiKwik with the necessary capital to scale its operations but also underscored the strategic interest of global finance and technology players in India’s rapidly evolving fintech ecosystem​​.

Financial Health and Market Position

As of September 30, 2023, MobiKwik has demonstrated a robust financial performance, turning profitable in the six months ending on that date with a profit of $1.1 million on revenue of $29.3 million​​. This profitability pivot is a significant milestone considering the losses it reported in the financial years 2021, 2022, and 2023. With 146.94 million registered users and 3.81 million merchant partners, the platform’s expansive reach underscores its potential for growth and its substantial impact on the digital financial services ecosystem in India​​.

IPO Objectives and Allocation of Funds

The IPO proceeds are earmarked for various strategic initiatives: expanding its financial services business, investing in payment services, and enhancing its technological infrastructure with a focus on data analytics, machine learning, and artificial intelligence​​​​. MobiKwik is allocating funds towards capital expenditure for its payment devices business, reinforcing its commitment to providing comprehensive financial solutions to its merchant network and leveraging technology to predict and improve credit behavior among large population sets​​.

The company is expected to reach a valuation of up to $1.7 billion in connection with its IPO efforts​​. This valuation reflects MobiKwik’s significant growth and strategic positioning within the competitive landscape of India’s digital payments and financial services industry.

MobiKwik’s journey towards its IPO includes plans to raise ₹700 crore through a fresh issue of equity shares, as detailed in its Draft Red Herring Prospectus (DRHP) submitted to the Securities and Exchange Board of India (SEBI). The DRHP outlines an extensive use of the proceeds from the IPO, including investment in the company’s financial services business, payment services, data, machine learning, artificial intelligence, and capital expenditure​

Challenges and Risks

MobiKwik’s journey is not devoid of challenges. The company faces stiff competition from other fintech giants such as PhonePe, Paytm, and Freecharge​​. Its dependency on partnerships with lending institutions for compliance with digital lending regulations and the operational reliance on its payment gateway ZaakPay represent potential vulnerabilities​​​​. Additionally, MobiKwik’s strategy involves navigating the complexities of regulatory compliance and managing the risks associated with the rapidly evolving fintech landscape.

Looking Ahead

MobiKwik’s IPO in 2024 signifies a pivotal moment in its growth trajectory. By bolstering its financial services and leveraging advanced technology, the company is well-positioned to expand its market presence and enhance its offerings. The strategic allocation of IPO funds towards growth and technological innovation reflects MobiKwik’s ambition to remain a significant player in India’s competitive fintech sector.

Co-founder Upasana Taku’s vision to double the firm’s revenue to Rs 800-1,000 crores in FY2024, while maintaining profitability at the net level, underscores the company’s aggressive growth strategy. This ambition is supported by MobiKwik’s focus on serving a wide customer base, particularly in tier-3 and tier-5 towns, by offering the “entire gamut of financial services”