Decoding MobiKwik’s Plans To Get Back Into The Profitability Lane

Fintech company MobiKwik saw an overwhelming investor traction for its initial public offering (IPO) last year, primarily due to it being one of the few fintech companies that was profitable for an entire fiscal year. 

While the company had reported a net profit of INR 14.1 Cr in the fiscal year 2023-24 (FY24), it has reported losses across all three quarters of the ongoing financial year. 

In its latest financial disclosure for Q3 FY25, the company reported a net loss of INR 55.28 Cr,  taking its loss count for the first nine months of FY25 to INR 65.49 Cr. From an EBITDA perspective, the company plunged into an EBITDA loss of INR 42.67 Cr in the December quarter. It reported an EBITDA profit of INR 10.83 Cr in the same quarter last year and an EBITDA profit of INR 6.80 Cr in Q2 FY25. 

The company’s bottom line was impacted due to the following reasons in Q3:

Decline In Financial Services Revenue: Revenue from this stream dipped to INR 73 Cr in the quarter, down 53% YoY and 29% QoQ, primarily due to lower credit product distribution. MobiKwik’s financial services include credit products, bill payments, bank transfer, wallet to wallet transactions, among others. 

Higher Lending-Related Costs: Increase in lending related costs due to a transition to “new Default Loss Guarantee (DLG) contracts, where a larger portion of the costs are incurred in the initial period”.

Lower Contribution Margins: The contribution margin percentage for MobiKwik reduced to 26.6% from 37.7% in Q3 FY24 and 40.2% in Q2 FY25.

However, despite the company plunging into losses, MobiKwik’s revenue from operations jumped nearly 18% to INR 269.47 Cr in the December quarter of FY25 from INR 228.93 Cr in the same quarter last year. 

Besides the top line growth, the company also saw its userbase cross the 172 Mn mark with addition of 5 Mn new users in the quarter and an 110K increase in its merchant base to 4.5 Mn. Revenue from the payments business also grew 166% YoY to INR 196.5 Cr in Q3 FY25. 

“One thing I can assure you, MobiKwik will continue to execute in the same heads down, frugal manner as we have been with the same DNA of chasing profits and growth with an extremely high bar for governance,” the company’s cofounder and CFO Upasana Taku said at the very beginning of the company’s post-earnings call. 

During an over hour-long call, Taku and CEO Bipin Preet Singh fielded questions from investors regarding the company’s future outlook. Here are the key takeaways on MobiKwik’s plans to get back into the black moving forward. 

Bounce Back In Credit Distribution

A major laggard for MobiKwik’s revenue stream was the decline in its credit product, ZIP. MobiKwik ZIP offers personal loans, which users can pay in installments. 

RECOMMENDED FOR yOU

News

New-Age Tech Stocks Bleed About $5 Bn As India’s Market Cap ...

Akshit P.

16th February, 2025

News

First Made-In-India Chip To Be Rolled Out By October: IT Min...

Team Inc42

16th February, 2025

News

GenAI Startup Ikonz Gets Strategic Investment To Boost Its I...

Palak S.

15th February, 2025

In the December quarter, the company reported a revenue of INR 73 Cr from this stream, down 53% YoY and 29% QoQ. The credit product distribution, or the digital credit GMV, also fell to INR 700 Cr, down 71% YoY and 56% QoQ. Of this, INR 300 Cr came from ZIP, while the remainder came from ZIP EMI.

“ZIP being scaled down due to lower appetite from lending partners for small ticket credit products… Focus on larger tenure ZIP EMI product to high quality customers in line with lending partner strategy,” the company said in its investor presentation. 

In a bid to counter this, Taku said that the company is now focussing on balancing its lending portfolio by adding new products, some of which would be secured. Besides, MobiKwik is also experimenting with new lending models, moving beyond the DLG guarantee model to a “lead-gen” based risk-free contracts. For this, it is onboarding new partners. 

Meanwhile, Taku also said that this was the first quarter when the company felt a full impact of switching to DLG contracts with its lending partners. This led to a decline in the revenue that was recognised as well as an increase in the costs for the company. 

Under the DLG model, lending service providers, like MobiKwik, guarantee to compensate for some of the losses to a registered entity if a lender defaults.

Moving forward, MobiKwik is looking to launch a cobranded RuPay Credit Card on UPI offering soon. “We are planning to launch our cobranded Rupay credit card, which is still in a beta phase, very soon. This will allow us to capitalise on enabling users to get small-ticket credit for their spends everywhere on UPI,” she said

Savings and Insurance Focus Areas For 2025

The cofounders said that the company will look at foraying into new fintech verticals in this calendar year. The company’s most immediate focus will be on expanding MobiKwik’s spends analytics platform Lens and entering the insurance aggregator space. 

Taku said that the company has made a lot of investments in Lens in the recent past. The platform allows users to review their spending, keep track of recurring expenses, among others. 

“We have made a lot of investments in Lens, which we see as a digital financial advisor for the masses. The platform could lead to an increase in user investments in financial instruments like fixed deposits, digital gold, etc, using MobiKwik,” she added.

The second vertical that MobiKwik is planning to foray into in 2025 is insurance distribution, for which the company has secured the necessary licence from the Insurance Regulatory and Development Authority of India (IRDAI). 

PPI On UPI: A New Revenue Stream? 

In Q3, MobiKwik emerged as the largest digital wallet provider and the 16th largest UPI player in India. The company is now focussing on scaling up its prepaid payment instruments (PPI) offering, Pocket UPI. 

“Significant headroom to gain market share in the UPI ecosystem through differentiated products such as Pocket UPI, which allows users to use a digital wallet to pay on the UPI network,” the company said in the investor presentation. 

During the call, Singh said that the company began working on further developing Pocket UPI in 2024 and is bullish on the offering. A major reason for this is the potential Merchant Discount Rate (MDR) that could open up a revenue stream in the near future. 

In 2023, the National Payments Corporation of India (NPCI) recommended the introduction of an interchange fee of up to 1.1% on UPI transactions made through PPI. This fee applies to transactions over INR 2,000. 

Singh said that the discussions to implement this are in final stages. “There is a strong push in the UPI ecosystem for the usage of PPI. The reason for that is that it takes a lot of  load away from the core banking ecosystem from a fraud perspective. We expect this to benefit us in the long run in a sustainable way and we are very bullish on this,” he said.

Shares of MobiKwik ended Tuesday’s trading session 0.78% lower at INR 403.10 on the BSE.