In Charts: MobiKwik plans Rs 572 crore IPO. Why its financial services play deserves attention
07 Dec 2024, 01:40 AMWhile the company has disclosed financials till Q1FY25, the FY25Q2 and FY25Q3 will give a clear view on the performance of MobiKwik.
Arti Singh
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MobiKwik has filed its Red Herring Prospectus (RHP) with the Securities and Exchange Board of India (SEBI) to raise Rs 572 crore through a fresh issue of equity shares.
This is the third time the Gurugram-based fintech has downsized its IPO offering. In 2021, MobiKwik filed its first DRHP, announcing its plans to do Rs 1900 crore-IPO. In January this year, the DRHP was submitted again and the issue size was reduced to Rs 700 crore.
Apart from that, the company's valuation has also see a significant drop from 2021.
The company plans to allocate Rs 150 crore from its IPO proceeds to accelerate the growth of its financial services business and Rs 135 crore to bolster its payments services segment, among other initiatives.
Interestingly, in its Draft Red Herring Prospectus (DRHP) filed in January this year, MobiKwik had announced an intention to invest Rs 250 crore specifically into its financial services vertical. However, with the fintech landscape evolving dramatically over the past year, it seems the company has also recalibrated its strategic priorities to align with the shifting industry dynamics.
Mobikwik IPO will open for subscription on December 11 and conclude on December 13, with a price band of Rs 265-Rs 279.
MobiKwik IPO: Highlights
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While the company has disclosed financials till Q1FY25, the September and December ending quarters will give a clear view on the performance of MobiKwik's financial services as well as overall business.
Why do we say so?
MobiKwik’s credit/wealth business was largely driven by peer-to-peer offering ‘Xtra’. The business is expected to see an impact as the P2P is no longer in its earlier avataar. In September, The Head and Tale reported how Mobikwik Xtra offering faced consumer flak after suspending its anytime withdrawal feature, following regulatory changes introduced by the RBI in August.
MobiKwik, in its RHP, mentions that Xtra, "may be susceptible to certain credit, liquidity and reputational risks and risks associated with changing regulations, exacerbated by the fact that we have distribution arrangement only one partner. The inability of borrowers to fulfil their repayment obligations may lead to financial losses for investors, adversely affecting the overall returns to our consumers, which will in turn affect the marketability of Xtra.”
MobiKwik's RHP stated:
“In addition, reputation risk is a critical concern for Xtra, tied to the potential adverse consequences stemming from various factors such as withdrawal defaults, cybersecurity lapses, or operational disruptions. Any negative publicity or events that erode investor confidence may impact their willingness to participate in Xtra.”
“We may be impacted by a rise in cost of capital, which could decrease the attractiveness of our Digital Credit and increase in the interest rates may decrease the attractiveness of Xtra, distributed through our platform. The profitability of our Company’s Digital Credit distribution businesses is significantly linked to the cost of capital (being the interest rates charged by our Lending Partners to disburse loans through our financial services business).”
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The Head and Tale: Analysis
The digital lending industry is currently facing a set of challenges, particularly in the wake of increased regulatory scrutiny. Non-Banking Financial Companies (NBFCs) are scaling back their exposure to digital lending platforms as the Reserve Bank of India (RBI) tightens oversight.
Industry insiders suggest that products such as short-term credit and credit lines are coming under heightened scrutiny, with the regulator signaling concerns over these offerings. There is a growing belief that the RBI may be discouraging NBFCs from offering credit line-based products, which are viewed as riskier and potentially prone to misuse. This shift in regulatory stance is prompting many lenders to reassess their digital lending strategies and adapt to the evolving compliance landscape.
This regulatory changes could pose an impact on MobiKwik ZIP offerings.
In its RHP, MobiKwik has stated it has 11 lending partners, namely Unity Small Finance Bank Limited, TVS Credit Services Limited, Hero Fincorp Ltd., Poonawalla Fincorp Limited, SMFG India Credit Co. Ltd. (formerly known as Fullerton India), Suryoday Small Finance Bank Limited, Northern Arc Capital Limited, MyShubhLife (Datasigns Technologies Private Limited), Krazybee Services Private Limited, Vivriti Capital Limited and Transactree Technologies.
It would be interesting to see how many lenders -- after the RBI scrutiny -- are still supporting MobiKwik.
The author is Founder and Editor of The Head and Tale. She can be reached at
[email protected]
Tweets @artijourno
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