Mobikwik IPO decoded

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MobiKwik, the 12 year old, Gurugram-based, digital transaction platform has joined the growing list of consumer internet firms like Paytm, Nykaa, Zomato and PolicyBazaar seeking to float an IPO this year. 

MobiKwik’s parent company, One Mobikwik Systems filed a Draft Red Herring Prospectus (DRHP) with the market regulator SEBI to raise ₹1,900 crore

MobiKwik is set to raise funds with the issue of fresh shares worth ₹1,500 crore and the offloading of equity shares that is said to add up to ₹4,000 crore.

A total of 34.52% stake (the biggest) in the startup is held by Founders and Promoters  — Bipin Preet Singh and Upasana Taku — who hold 20.21% and 14.3% respectively. The current biggest investor is Sequoia with 17.25% stake. Sequoia is followed by Bajaj Finance who hold 13.8%, Net1 Applied Technologies has 10.79% stake, while Tree Line Asia holds 4.43%. Lastly, Abu Dhabi Investment Authority and Cisco Systems hold  2.89% and 2.08% respectively. The remaining shareholders own less than 1% stake, their cumulative holdings amount to 14.18%. 

Bajaj Finance will offer equity shares worth ₹68.9 crores, while American Express will be offloading shares up to ₹9.9 crore. Additionally, Sequoia will be offering shares worth ₹94 crore, Treeline Asia will be giving up shares of ₹24 crore, and Cisco Systems will be offloading shares of ₹11 crore. These numbers max out when it comes to the founders with Singh and Taku offering ₹111 crore and ₹78 crore respectively. 

Founded in 2009, by Bipin Preet Singh and Upasana Taku, MobiKwik started out as a digital wallet and expanded into a horizontal fintech platform that currently offers services like credit, insurance, and gold loans. To sum it up, they are actively bridging the gap of unmet credit needs of fast-growing online transactors by bringing together convenience of everyday mobile payments and the plus sides of the buy-now-pay-later trend. The company was last valued at $700 million after raising $20 million in June, 2021 at the Abu Dhabi Investment Authority (ADIA). 

The DRHP states that MobiKwik’s revenue from operations fell by 18.7% to ₹288.5 crore in 2021 from ₹355.6 crore in 2020, mostly due to the effects of pandemic.

The company also disclosed a total income of ₹302 crore in the March-ended financial year. This shows a clear drop of 18% from ₹369 crore recorded in 2020. 

The losses further grew to ₹110.9 in 2021 — a considerable 11.9% increase from the ₹99.1 crore MobiKwik had declared in 2020. As far as expenses are concerned, it fell to ₹404 crore in 2021 from ₹454.4 in 2020. The declining trend also extended to the company’s employee benefits that fell to ₹53 crore in 2021 from 65.6 crore in 2020. 

The promising growth of the company reflects in the number of users they were able to onboard. 

MobiKwik has a total of 120 million users, 80% of whom were acquired organically and 26 million were added in just one year’s time. And in 2020 MobiKwik’s net revenue grew 133% to ₹379 crores and EBITDA loss reduced 63% to ₹45 crores. Additionally, cash EBITDA loss reduced 91% to ₹8.5 crores. As far as net revenue per employee is concerned, it grew by 195% to ₹1.27 crores from ₹0.43 crores in 2019. MobiKwik‘s capital efficiency was noted to be 8x in 2020 after ₹26 crores raised in early 2019 delivered ₹203 crores in incremental net revenue.  

The time of MobiKwik’s IPO is also witnessing a huge shift in India’s investment landscape. Some IPO-bound shares have been heavily traded in the unlisted space. This is also true in the case of MobiKwik. 

Investors have been buying these shares at fairly lower valuations to fetch better results post listing. This trend was also seen in the case of Paytm, Sterlite Power Transmission, Anand Rathi Wealth, Lava International, Fino Paytech, and Aarohan Financial. Another reason that has investors gravitating towards unlisted markets is the low probability of actually landing an IPO allotment.