MobiKwik DRHP: Things to be mindful of are the growing financial services sector, continuous profitability, and rigorous limitations.
Bipin Preet Singh and Upasana Taku established MobiKwik in 2009, and as of now, the app has about 14.6 crore registered users. Credit goods, such as pay-late options for personal loans and payment gateway fees (Zaakpay), provide for the majority of MobiKwik’s revenue. Then come mutual fund distributions and profits from Xtra, a peer-to-peer lending network.
The business is experimenting with merchant loans in addition to releasing a soundbox named Vibe recently. According to the statement, it has enabled 8.1 crore sellers to take payments online and offline.
The offer, MobiKwik’s financial situation, its application for a payment aggregator license, and some substantial outstanding litigation are the top five things to be aware of in its DRHP.
Offer details of Mobikwik
MobiKwik will solely issue fresh shares in its initial public offering (IPO); an offer-for-sale (OFS) will not be included.
The company’s top investors are Peak XV Partners with 13.09 percent of the shares, Bajaj Finance with roughly 13.44 percent, and Net1 Applied Technologies with 10.47 percent.
Since its establishment, the company has raised up to $269 million in funding from a range of investors, including Peak XV and Bajaj Finance.
In compliance with the company’s DRHP, the entire offering will be a new share offering without any OFS. However, the DRHP notes that the company may reduce the size of the new offering if lead managers recommend it by selling securities through a pre-IPO placement priced at Rs 140 crore.
Pre-IPO placement is when a company sells its unregistered shares before they are initially listed on a stock exchange.
Also read: Stock Split in January 2024.
Making use of the IPO money
Retail loans, UPI payments, payment gateway services, and other services are among the many services that Mobikwik now offers under four verticals. Under the payment gateway division, Zaak e-Payment Services Private Limited, also known as Zaakpay, is one of the company’s subsidiaries that provides payment gateway services.
Financial planning, investment advisory, and consulting services pertaining to securities, investments, etc. are currently provided by MobiKwik Investment Adviser Private Limited. The business has not yet started operations under MobiKwik Credit Private Limited and MobiKwik Finance Private Limited.
The DRHP stated that it would use roughly Rs 250 crore of the proceeds from the IPO to fund the growth of its financial services business, roughly Rs 135 crore for its payment services division, and roughly Rs 135 crore for investments in data, products, and technology, including artificial intelligence and machine learning. The payment device business is expected to incur capital costs of around Rs 70 crore.
Despite operating income of Rs 540 crore, MobiKwik reported a net loss of Rs 84 crore for the fiscal year 2022-2023 (FY23). There were costs of Rs 617 crore and an operating deficit of Rs 56 crore.
However, in the first half of 2024, MobiKwik recorded a net profit of Rs 9.4 crore and operating income of Rs 381 crore, while costs dropped to Rs 366 crore, citing the company’s DRHP. The business also reported an operational profit of Rs 20 crore.
“As we expand the range of products we provide, we’ve improved our platform to make it an even more enticing option for our clients, all the while maximizing value and profitability. Our firm achieved a profit of Rs 94.78 million, or Rs 9.4 crore, for the six months that ended on September 30, 2023, the company said in its DRHP.
Board of Directors members' compensation
MobiKwik’s co-founder, Bipin Preet Singh, has been appointed managing director and CEO of the openly traded business. Upasana Taku continues to hold the position of Chief Financial Officer (CFO) in addition to being the executive director and chairman.
The company has appointed Sayali Karanjkar, Navdeep Singh Suri, Punita Kumar Sinha, and Raghu Ram Hiremagalur Venkatesh as independent directors.
2020 saw the acquisition of PaySense Services India Private Limited by Naspers-backed PayU, of which Karanjkar was a co-founder and CBO. Suri has served as India’s ambassador to the UAE and the Arab Republic of Egypt as well as the High Commissioner of India to Australia and the Consul General of Johannesburg. Sinha has held the position of independent director for businesses including JSW Steel Limited and Infosys Limited. Venkatesh is the vice president of engineering and chief technology officer (CTO) of LinkedIn Corporation at the moment.
Board of Directors members' compensation
MobiKwik’s co-founder, Bipin Preet Singh, has been appointed managing director and CEO of the openly traded business. Upasana Taku continues to hold the position of Chief Financial Officer (CFO) in addition to being the executive director and chairman.
The company has appointed Sayali Karanjkar, Navdeep Singh Suri, Punita Kumar Sinha, and Raghu Ram Hiremagalur Venkatesh as independent directors.
2020 saw the acquisition of PaySense Services India Private Limited by Naspers-backed PayU, of which Karanjkar was a co-founder and CBO. Suri has served as India’s ambassador to the UAE and the Arab Republic of Egypt as well as the High Commissioner of India to Australia and the Consul General of Johannesburg. Sinha has held the position of independent director for businesses including JSW Steel Limited and Infosys Limited. Venkatesh is the vice president of engineering and chief technology officer (CTO) of LinkedIn Corporation at the moment.
Vineet Bansal will hold the position of non-executive, non-independent nominee director for MobiKwik in addition to his function as an independent director of Handy Online Solutions Private Limited.
The DRHP provides an annual pay of Rs 17 lakh to MobiKwik’s independent directors, plus an additional Rs 1 lakh for board meetings and Rs 1 lakh for meetings of the board’s statutory committees.
Furthermore, independent directors are also entitled to reimbursement for any incidental expenses, such as hotel and travel, incurred in connection with attending these meetings.
Non-executive, non-independent directors are entitled to a sitting fee of Rs 1 lakh per meeting for attending our board meetings.
As of the date of the DRHP for FY23, Upasana Taku and Bipin Preet Singh had each earned pay from the company totaling Rs 2.4 crore.
License for Zaakpay, awaiting clearances
Due to its status as a financial technology platform, MobiKwik’s activities are susceptible to changes in regulatory environments.
The platform’s application for a license to function as a payments aggregator was turned down in 2021. After reapplying, it was given the go-ahead in theory, but the final approval has not yet been granted.
“We may or may not receive the final approval…As an alternative, it said, “If, upon getting the RBI’s final approval, we are unable to expand our payment aggregator business through Zaakpay, we run the danger of losing money and harming our reputation.
According to MobiKwik, during the past several years, two of its rivals, Paytm and PhonePe, have been able to surpass it in terms of volume, value, and product offers. MobiKwik faces intense competition from these businesses.
The company asserts, “We might not be able to respond to new or evolving technologies and changes in consumer and merchant preferences as quickly as our rivals, which might make our platform less appealing or outdated.” Their superior product development abilities and financial resources are the reason behind this.
Furthermore, concerning the inaccuracy in recordkeeping and compliance with distributions to particular non-resident investors, including Sequoia Capital India Investments, Tree Line Asia Master Fund, Cisco Systems, and GMO Global Payment Fund, MobiKwik has submitted data to the RBI.
The application was filed in December 2023, and it is currently waiting at the RBI.
The influence of DLG: Risk of contract renegotiation
Like many other businesses, MobiKwik has been attempting to expand its lending. Financial services brought in Rs 285.02 crore, or 52.83 percent of total revenue, in FY23.
In its capacity as a loan service provider (LSP), the platform has non-exclusive, short-term contracts with lenders including Transactree Technologies, Hero Fincorp, Northern Arc Capital, SMFG India Credit (formerly Fullerton India), and MyShubhLife. The partner may end these arrangements by giving written notice.
According to the DHRP, these contracts are now being renegotiated after the publication of the Digital Lending Guidelines (DLG).
If the renegotiation fails or if the RBI finds that the earlier agreements did not conform with the new requirements, it may levy penalties or take other action against the lending partners. This might affect MobiKwik’s capacity to carry out business.