Amid Uncertainty Over IPO, MobiKwik Raises INR 55 Cr In Debt

In the midst of a likely-shelved IPO and an industry-wide downturn, fintech startup Mobikwik has raised INR 55 Cr ($6.7 Mn) in debt from venture capital firm BlockSoil and alternate investment fund, Karnation. 

In regulatory filings with the Registrar of Companies (RoC), MobiKwik said that it has raised INR 45 Cr from BlockSoil via two of the latter’s subsidiaries – BlackSoil Capital and BlackSoil India Credit Fund. In August, the board of the startup passed a resolution to allot 900 non-convertible debentures (NCDs) to the VC giant at an issue price of INR 5 Lakh each.

Subsequently, in September, the board also approved a proposal to allot 200 NCDs at a face value of INR 10 Lakh each, totalling around INR 10 Cr in favour of Karnation.

NCDs are debentures that cannot be converted into shares or equities and have a fixed maturity date. 

The regulatory filings also show that MobiKwik has updated its ESOP 2014 policy, specifically regarding the time frame within which employees can execute the options in the event of termination or resignation.

The new norms draw the distinction between two scenarios, listed and unlisted, citing the ‘best interest of option holders.’

In the event that the startup is listed, an employee, who has voluntarily taken up retirement, will be free to exercise their ESOPs within six months. Earlier, the time frame within which employees could avail their stock options was three months.

If the ESOPs are not availed within the said period, then they will purportedly lapse. The new amendment also empowers the nominations and remuneration committee to waive off the rule at its discretion, under certain criteria.

On the other hand, if the startup remains unlisted, an employee can exercise their stock options within three years from the last day of their job or within six months from the date of listing, whichever is earlier.

Additionally, the MobiKwik board also passed a resolution to reappoint Chandan Joshi, who currently serves as the head of the payments business, as the director of the startup. 

MobiKwik: In An Upheaval

The move to raise funding comes months after Mobikwik Chairperson and Chief Operating Officer (COO) Upasana Taku said that the startup was planning to raise up to $100 Mn in funding from investors. Back then, she had also reiterated that the startup had also planned to go ahead with the IPO at an opportune time. 

What has emerged since then has been a dismal picture of the situation on the ground. Against the $100 Mn threshold, MobiKwik has so far only raised $6.7 Mn and that too in multiple tranches. It was not immediately clear whether the fintech player intends to raise more money.

The startup has been facing major headwinds from adverse market conditions, including the ongoing Russia-Ukraine war, rising crude oil prices, apprehensions of a recession and the purported funding winter. 

While the funding winter has forced many new age tech companies to shelve their expansion plans, many others have been furiously cutting corners and firing employees to conserve cash. 

Such has been the capital crunch that funding raised by Indian startups has fallen to 2020 levels. According to Inc42, funding declined for the fourth successive quarter in Q3 CY22, settling at $3 Bn, down 50% compared to the preceding quarter and 82% YoY.

Another aspect that has still not been fructified is its much-touted IPO. While there is no clarity on the ‘opportune time’, the clock appears to be ticking. The SEBI’s nod for its INR 1,900 Cr IPO appears set to expire later this month, even as MobiKwik appears to push its plans further for the listing.

As per its draft red herring prospectus (DRHP) filed with the market regulator, Mobikwik had planned to raise INR 1900 Cr through its IPO, comprising a fresh issue of shares of up to INR 1,500 Cr and an offer for sale of up to INR 400 Cr.

Many new-age tech startup stocks have either delayed or altogether shelved plans to list on the bourses amid the raging market volatility. The biggest casualty has been new age tech stocks which have plummeted anywhere between 40-60% in terms of share prices, from their record highs last year.

Founded in 2009 by Bipin Preet Singh and Taku, Mobikwik operates a fintech platform that offers multiple financial services including credit, insurance, gold loans along with staple mobile recharges.

The startup had last raised $20 Mn from Abu Dhabi Investment Authority, which had pegged it at $700 Mn. Post that, it entered the unicorn club in October last year, at a valuation of $1.5 Bn – $1.7 Bn, after a few of its employees exercised employee stock option plans.