Mobikwik Systems Limited refiled its draft red herring prospectus (DHRP) with the capital market regular, Securities and Exchange Board of India (SEBI) for a Rs 700 crore initial public offering (IPO) last week.
The company has reduced the size of the IPO to Rs 700 crore from its earlier attempt of 2021 when it tried to raise Rs 1900 crore. However, the IPO is a fresh equity share offering without the presence of an offer-for-sale component.
Why Mobikwik wants to raise the funds?
Mobikwik has a number of subsidiaries such as Zaak ePayment Services Private Limited or Zaakpay, MobiKwik Investment Adviser Private Limited (formerly known as Harvest Fintech Private Limited) and Mobikwik’s separate Credit and Finance segments.
Zaakpay functions under the payment gateway segment and works to provide e-commerce and digital payment gateways services. In October, it also received the Reserve Bank of India’s (RBI) in-principle authorisation to act as payment aggregator.
Its Investor Advisor subsidiary provides investment advisory, financial planning, and consultancy on securities, investments, among others.
As per the draft papers submitted to Sebi, it needs funds to expand in the financial services arena and thus require capital to broaden its business. Moreover, the start-up is also experimenting with merchant loans and recently launched Vibe, a sound-box enabling the merchants for smooth functioning.
Where will the funds be used?
The company founded by Bipin Preet Singh and Upasana Taku in 2009, started operations as a mobile wallet. Over the years, it has witnessed diversification of its business and strengthened itself as one of the largest digital finance products and services platforms in terms of registered users, standing with the likes of Paytm and PhonePe.
The proceeds from the fresh IPO will be utilised to further its business in a diversified manner. Rs 250 crore will be used to fund growth in its financial services business. Rs 135 crore will help it propel its payment services operations and other Rs 135 crore will support research and development activities across new age technologies such as artificial intelligence (AI), machine learning (ML), along with areas of data management, product and technology advancements.
Around Rs 70 crore will finance the corporate capital expenditure and payment device tenet of the company.
Reviewing the Numbers
According to the DHRP papers, Mobikwik’s revenue from operations increased to Rs 539.47 crore in financial year 23. It accounted for Rs 526.56 crore in revenue in the previous fiscal.
The company witnessed the loss for the year decreasing Rs 83.81 crore in fiscal 2023 by 34.60 per cent from Rs 128.16 crore in fiscal 2022.
As of September 2023, for FY24, the revenue from operations stood at Rs 381.09 crore and profit after tax stood at Rs 9.48 crore.
For the same period, its registered users stood at 146.94 million and it boasts of enabling 3.81 million merchants to conduct online and offline transactions.
The timing of IPO
The company, having lead investors like Bajaj Finance and Peak XV Partners, aims to get benefitted from the positive market sentiments regarding the recent IPO frenzy.
Over the years, it has raised more than $250 million from various investors including Bajaj and Peak XV.
In FY23, MobiKwik’s addressable market was estimated to be worth $5.3 billion and by FY28, it is expected to grow to approximately $16–18 billion, as per the company’s DRHP.
The fintech’s second try for the public issues in order to begin its capital market journey is worth witnessing as it looks forward to the buoyant market positioning fuelled by the investors.
As there’s a saying, it is worth taking a second shot, the MobiKwik IPO can witness a positive response from the investors. However, the company’s Q3 results can act as an important element to be the driving factor for the same.
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