Mobikwik IPO Analysis, Details & Review

Mobikwik IPO Analysis
IPO Details
Issue SizeRs. 1900Cr
Fresh IssueRs. 1500Cr
Offer for SaleRs. 4000Cr
Listing atBSE & NSE
Source: Mobikwik DRHP

Objective of the issue
1) Funding organic growth initiatives:
Mobikwik has planned to employ at least 40% of its Net Proceeds in funding organic growth  drive. The organic growth drive includes Consumer and merchant acquisition and detainment through various promotional, marketing and branding initiatives. The company offers  rewards such as discounts, cashbacks, loyalty points in order to acquire new and to retain  existing users and merchants. On the other hand, Mobikwik plans to upgrade its search engine and app-store optimization to lever more consumers to their platforms. Its wish to  bring new FinTech products, and for the same, the Company plans to plow in people,  engineering amazing class technology, research and development and evaluate new ideas. Mobikwik is an online payment facility provider. It is one among early inventors of BNPL (Buy Now, Pay Later). To facilitate such transactions, it partners with NBFCs who provide capital  which is then provided as credit to BNPL patrons. Of the net proceeds, a chunk can be  utilized towards providing such cash collateral. 

2) Funding inorganic growth initiatives:
The company tends to resource net proceeds for fire coming strategic initiatives. The  FinTech race continues, Mobikwik also planning to offer innovative products and services to  its promoters. In 2018, it acquired Clear funds, an online mutual fund platform to offer  wealthtech products. This has had a significant impact on Mobikwik’s business, as per DRHP.  While Mobikwik has not got into a definitive agreement with anybody for strategic  acquisition as of now, it intends to utilize the funds for future acquisitions. 

3) General corporate purposes
The balance Net Proceeds shall be utilized towards general corporate purposes such as,  investment in subsidiaries, other capital expenditure, working capital requirements, new  product development etc. 

Who’s selling?
Mobikwik is backed by marquee investors like Sequoia Capital, Tree Line Asia, Bajaj  Finance etc. Along with promoters Bipin Singh and Upasana Taku, who hold major stakes in  the company, investors like American Express, Cisco Systems, Bajaj Finance and Sequoia are  offloading their shares for the IPO. 

Understand the business
MobiKwik is among the largest mobile wallet and Buy Now Pay Later players in India, based  on mobile wallet gross merchandise value (GMV) and BNPL GMV respectively in FY2021.  Mobikwik System Ltd. incorporated in 2009 with Mobikwik Wallet so that users could keep  money in a virtual wallet and help in paying their regular bills. As of FY21, Mobikwik had  over 1.0137 billion registered users and over 3.44 million e-commerce, physical retail and bill  partners. 

BNPL is Mobikwik’s flagship product. It allows users to conveniently make purchases today  and pay for it at a later date. Mobikwik Zip is an interest-free product with Rs. 500 to Rs.  30,000 credit limit available in the user’s Mobikwik wallet with a one tap activation in 15- day cycles. At the end of the cycle, a user is required to pay the due amount within five  days. 

The next step of Mobikwik Zip is Zip EMI. Users with a satisfactory credit history on  Mobikwik Zip platform get upgraded to Zip EMI. This product is focused on users who wish  to purchase high-value products between Rs. 25,000 to Rs. 1, 00,000.

Along with primary services offerings, Mobikwik also made an entry in Wealthtech and  Insuretech products. It acquired Clear funds in 2018 to offer wealthtech products. As of  March 31, 2021, it has partnered with 36 asset management companies, including the likes  of UTI Mutual Fund, DSP and Aditya Birla Sun Life Mutual Fund. Mobikwik allows its users  to start investing with an amount as low as Rs. 100. Mobikwik also allows its users to trade in  digital gold through its strategic partnership with SafeGold. The Asset under Management Mobikwik’s offerings amounted to Rs. 1.652.50mn, Rs. 2,879mn, and Rs. 3,963mn in FY19,  FY20 and FY21, respectively. 

Story through numbers

Understand the business
Mobikwik is the second internet-based payment facilitator launching an IPO. Thus, we need to  look at internet and internet-connected devices penetration in the coming years to gauge  the future outlook of Mobikwik. Below are the industry tailwinds that can ease Mobikwik’s  way forward: 

• India has reached one of the highest smartphone and internet penetration in the world.  Growth of India’s consumer internet market for products and services – to become a  US$ 300 billion plus industry by FY26. 

• India’s consumer internet market experienced a ‘V-shaped’ recovery in gross  transaction value (“GTV”) terms through the course of Fiscal 2021. The consumer  internet market is expected to continue steady growth in FY22 and cross triple digits  GTV for the first time and eventually reach over US$ 300 billion by FY26. 

• Within mobile payments, mobile wallet payments are expected to grow (by value) by  three times to reach approximately US$ 60-70 billion by Fiscal 2026.

• One of the biggest growth drivers that is expected to push mobile wallet growth during  FY21 – FY26 is enabling regulations. The RBI’s decision on interoperability of wallets  allows mobile wallets to become members of card schemes such as Visa, Mastercard  and American Express enabling them to directly issue prepaid cards to their users. 

• BNPL has also emerged as a large and fast-growing opportunity to democratize lending. 

• BNPL is a disruptive trend driving access to consumption credit and is likely to grow  rapidly in future- as most of its target categories are themselves also poised for rapid  growth in the next few years. 

• India’s BNPL market has rapidly grown to reach US$ 3-3.5 billion in disbursals in Fiscal  2021 and is on track to grow to US$ 45-50 billion by Fiscal 2026 driven by user growth. • BNPL in India is expected to grow approximately 15 times in the next five years and  become a large share of the consumer internet market.

MyFinopedia Expert’s Views: 
Mobikwik is not alone as a mobile-based payment platform to launch an IPO. Paytm which is  the largest in the FinTech space is also in the pipeline and has filed for DRHP with the  market regulator Securities Exchange board of India. By no means can Mobikwik touch  Paytm in terms of valuations and clientele. Mobikwik’s IPO will be a hit or not, let the time  decide. If you look at the figures, the picture may not look attractive. But seeing Zomato’s IPO we  realized that the time is changing. Despite low financials, Zomato’s issues on Dalal Street  were a blockbuster. We expect the same for Mobikwik.

Disclaimer: Information shared in this email is only for educational purpose. One should not consider it as a buy/sell/hold recommendations by MyFinopedia. Giving recommendations without assessing an investor’s risk is prohibited by SEBI.

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