Lean Valuations & Lagging Investors Interest Hold Up MobiKwik IPO Further

The much-hyped startup IPO season seems to have met hurdles; with concerns of high valuation and profitability of startups going rife more so after the weak listing of fintech giant Paytm.

The first proposed public offer to have fallen prey to the anxiety among investors is that of MobiKwik. On November 15, The Morning Context reported that two institutional investors, Eastspring Investments and Nomura, who had committed to invest in the startup’s IPO, have pulled back.

Citing people in the know of the developments, it reported that along with high valuations, the investors are also doubtful about the company’s ability to compete in India’s crowded fintech space.

Last month, IPO-bound MobiKwik joined the $1 Bn club after a few employees exercised employee stock option plans (ESOPs). In June, MobiKwik raised $20 Mn from the United Arab Emirates (UAE) sovereign wealth fund Abu Dhabi Investment Authority at a valuation of $700 Mn.

The fear of a subdued IPO and weak listing has gained momentum after the poor response to the Paytm offer, wherein the latter was listed at a discount of over 9% and declined further in the first two sessions. This resulted in heavy losses for the investors.

Analysts are of the view that this weak response is likely to impact the investor sentiments in the short term and more importantly, make companies and investment bankers conservative in terms of valuations going ahead.

MobiKwik had received the approval from Securities and Exchange Board of India (SEBI) on October 7, way before the green signal to Paytm. It was expected to bring its offer ahead of Diwali.

In response to a query from Inc42, MobiKwik said in a statement that it “Will list at the right time”.

The statement also highlighted that it was bootstrapped for the first four years and has achieved its current scale of 101 Mn users (as of March 2021) having spent only $100 Mn since inception.

The company is focused on Buy Now Pay Later (BNPL) for daily life payments and has the largest number of pre-approved BNPL users in India at 22.3 Mn (as of March 2021), it added. 

“It has always adopted a sustainable growth strategy. The company is witnessing strong business growth, has a clear path to profitability and will list at the right time,” the company statement added.

The INR 1,900 Cr IPO comprises a fresh issue of equity shares up to INR 1,500 Cr and an offer for sale for certain existing shareholders up to INR 400 Cr.

As per MobiKwik’s draft red herring prospectus (DRHP) filed in July, its offer of sale (OFS) includes the sale of shares worth INR 9.9 Cr by American Express, INR 68.9 Cr from Bajaj Finance, INR 11 Cr by Cisco Systems, INR 94 Cr by Sequoia, INR 24 Cr by Treeline Asia, INR 111 Cr from founders (promoters) such as Bipin Preet Singh and INR 78 Cr from Upasana Taku.

The fintech startup plans to use the IPO proceeds for funding its organic and inorganic growth initiatives and general corporate purposes, as per its draft prospectus.

According to its DRHP, Mobikwik’s revenue from operations fell by 18.7% to INR 288.5 Cr in FY21 from INR 355.6 Cr in the previous year (FY20). The company posted a total income of INR 302 Cr in the March ended financial year, a drop of 18% from INR 369 Cr that was recorded in FY20.

Founded in 2009 by Bipin Preet Singh and his wife Upasana Taku, MobiKwik started as a digital wallet but gradually forayed into a horizontal fintech platform that now offers services such as credit, insurance, and gold loans among others.