Mobikwik IPO 2024: Overview and Investment Insights of One Mobikwik Systems Ltd.

Mobikwik IPO (One Mobikwik Systems Ltd. ) : All you need to know about this company.

One Mobikwik Systems Ltd, a leading Indian fintech company, recently received approval from SEBI to launch its IPO aimed at raising ₹700 crore ($84 million). This marks the company’s second attempt to go public after shelving earlier IPO plans due to market conditions.

History of Mobikwik

Founded in 2009 by Bipin Preet Singh and Upasana Taku, Mobikwik started as a digital wallet provider, evolving into one of India’s leading payment and financial services platforms. Initially focused on offering mobile wallet services, the company has grown to provide a wider range of products including Buy Now Pay Later (BNPL) services, QR code payments, and payment gateway solutions through its subsidiary, Zaakpay.

Over the years, Mobikwik has secured a strong foothold in India’s digital payments ecosystem, especially among middle-class consumers and small merchants.

Services Offered by Mobikwik

Mobikwik operates across several financial service verticals, offering a robust range of services:

• Mobile Wallet: Mobikwik’s core product that allows users to store money and make payments for utilities, shopping, and transfers.
• Buy Now Pay Later (BNPL): Through MobiKwik Zip, users can access short-term credit for small-ticket purchases, a feature that has grown rapidly in popularity.
• Merchant Services: Mobikwik offers QR-based payments, the MobiKwik Vibe Soundbox, and MobiKwik EDC machines for businesses, enabling merchants to accept payments digitally.
• B2B Payment Gateway (Zaakpay): Through Zaakpay, Mobikwik provides payment solutions to e-commerce businesses, facilitating seamless online transactions.

As of March 2024, Mobikwik had 156 million registered users and enabled 3.81 million merchants to conduct transactions online and offline. The company’s GMV (Gross Merchandise Value) has grown at a compound annual rate of over 32%, underscoring its strong presence in the fintech space.

Key Investors of Mobikwik

Mobikwik has attracted several high-profile investors over the years, including:

• Peak XV Partners (formerly Sequoia Capital India)
• Abu Dhabi Investment Authority
• Bennett, Coleman and Company Limited (Times Group)
• Hindustan Times Ventures

These investors, along with various venture capital funds, have played a crucial role in supporting Mobikwik’s growth and expansion efforts. The current IPO is structured as a fresh issue, meaning no shares will be sold by existing investors, ensuring that the funds raised will be directly used for the company’s development.

Future Endeavours and Growth Plans

The proceeds from the IPO will be directed towards several key initiatives:

1. Expansion of Financial Services: A portion of the funds (₹250 crore) will be used to expand Mobikwik’s financial services, particularly its BNPL and lending products, which have witnessed rapid adoption.
2. Payment Services Growth: ₹135 crore is earmarked for scaling up Mobikwik’s payment services infrastructure, enhancing user experience and merchant capabilities.
3. Investment in Technology: Another ₹135 crore will go towards upgrading the company’s data analytics, AI, and machine learning capabilities, aiming to provide better fraud detection, personalization, and product innovation.
4. CapEx for Payment Devices: Mobikwik plans to invest around ₹70 crore in expanding its hardware offerings, such as payment devices like soundboxes and EDC machines.
5. General Corporate Purposes: The remaining funds will be used for general business expenses and working capital.

Growth Opportunities

The Indian digital payments market is experiencing exponential growth, driven by increased internet penetration, mobile adoption, and government initiatives promoting digital financial inclusion. As one of the key players in this sector, Mobikwik is well-positioned to benefit from these trends.

• BNPL Growth: The rise of BNPL services is transforming how consumers approach credit. With MobiKwik Zip, the company is capitalizing on this trend, particularly among middle-income customers who seek convenience and flexibility in payments.
• Merchant Acquisition: Mobikwik’s strong focus on small and medium-sized businesses (SMBs) allows it to tap into an underpenetrated market. Continued expansion of its QR code and merchant payment devices can drive significant growth in this segment.
• Financial Inclusion: With government-backed initiatives like UPI and the push for a cashless economy, Mobikwik’s products cater to consumers and merchants looking for simple, fast, and reliable payment methods, enhancing financial inclusion.
• Global Expansion: Mobikwik is also eyeing opportunities for international growth, especially in emerging markets with similar demographics and fintech needs.

Should You Invest in Mobikwik?

Reasons to Consider Investing:

1. Strong Growth Potential: Mobikwik has demonstrated consistent growth, particularly in its BNPL and merchant services segments, with revenue growing 62% year-over-year to reach ₹875 crore in FY24.
2. Profitable Operations: After years of losses, Mobikwik turned a profit of ₹14 crore in FY24, a significant improvement from the ₹80 crore loss it posted the previous year. This marks a key milestone in the company’s path to profitability.
3. High Market Penetration: With a registered user base of over 156 million and 3.81 million merchants, Mobikwik enjoys strong market penetration in both urban and semi-urban areas.
4. Growth in Digital Payments: The Indian digital payments industry is expected to continue growing rapidly, and Mobikwik is positioned to benefit from increased adoption of digital wallets, QR codes, and BNPL services.

Risks to Consider:

1. High Competition: Mobikwik faces intense competition from larger players like Paytm, PhonePe, and Google Pay, all of which are vying for market share in digital payments and financial services.
2. Regulatory Environment: The fintech space is subject to regulatory scrutiny, especially in areas like lending and data privacy. Any adverse regulatory changes could impact Mobikwik’s operations.
3. Profitability Concerns: While Mobikwik has turned profitable, sustaining this profitability while scaling operations remains a challenge, especially in a highly competitive market with pressure on margins.

Conclusion

Mobikwik’s IPO offers a promising opportunity for investors looking to tap into India’s burgeoning digital payments ecosystem. With solid growth prospects, a large user base, and an increasingly diversified product offering, the company is poised to grow in the coming years. However, potential investors should weigh the risks of competition and regulatory challenges before making a decision.

Overall, Mobikwik is a strong contender in the fintech space, and for those with a higher risk appetite, it could represent a strategic long-term investment.