“Now we have to do it again. We are a very mature company from that perspective,” Mobikwik’s co-founder and COO said of the company’s IPO plans, whose approval expired in November last year.
But the company is optimistic about getting back on track after nearly two years of rough patches, including being on the wrong side of the regulator. What fuels Upasana Taku’s confidence is the transition the company has gone through.
“We want to be able to deliver at least 2-3 profitable quarters in a row so that we can build confidence with the investor base that there is a way to scale business in digital financial services and be profitable,” Taku said.
A profitable growth story is indeed unique in the fintech ecosystem. But the outlook for Mobikwik hasn’t been rosy either. The company’s consolidated loss widened 15 per cent to Rs 128 crore in FY22, but it is confident of at least a quarter of profit in FY23 and full-year profitability in FY22. 24.
The fintech specialty is backed by big names like Sequoia Capital India, Bajaj Finance, American Express, Net1, Cisco System and Treeline Asia, who are not going to be forever patient. That seems to be the current challenge for the top brass: win back investor confidence, get their team in order, be on the right side of regulations, and make MobiKwik IPO-ready once again.
Coming out of the pandemic, sentiment for the startup ecosystem improved with the economic recovery. With capital markets in a bull run, Mobikwik turned to raising capital like many of its peers and began making internal changes.
Although he was not part of the founding team, Chandan Joshi was appointed co-founder and CEO of the payments business. He has also raised $35 million in 2021 from the Abu Dhabi Investment Authority and various family offices.
However, by the time Mobikwik got the go-ahead from SEBI for its ₹1900 crore IPO in October 2021, investor appetite had changed due to the dismal listing of Paytm owner One 97 Communications and the barrage of other IPOs that hit the market. But unlike most of Paytm’s IPO, MobiKwik’s IPO comprised a new issue of ₹1500 crore, intended to support growth for 3-4 years.
Worth $1.5-1.7 billion, Mobikwik had already landed in the ‘unicorn’ club. But low gray market interest in its unlisted shares led investment bankers to advise against the company going public, and the plan was shelved.
Mobikwik then turned to venture capital fund BlockSoil and AIF Karnation to raise Rs 55 crore in the second half of FY23. Meanwhile, former IndusInd Bank payments head Mukul Saxena was appointed CEO of Zaakpay, the MobiKwik’s payment gateway and financial services platform, replacing Chandan Joshi. Joshi was reappointed as director.
MobiKwik’s slump dates back to the pandemic, as the company posted losses since fiscal 20 due to ongoing struggles with rising expenses and regulatory compliance. The first regulatory blow came in December 2021 when RBI fined the company ₹1 crore for breaching the net worth requirement rules for Bharat’s bill payment operating units. While fixed, the series of regulatory guidelines on prepaid wallets and digital lending also caused significant disruptions in terms of workflow and back-end operations.
Now that cash burn is slowing due to lower cost of acquisition and cross-selling of products to existing users, incremental funding requirements are expected to be lower. 90 percent of Mobikwik’s incremental customer onboarding is organic, and the company has acquired 23 million customers in 2022. As such, fixed costs could increase by 5 to 10 percent as the company looks to add between 80 and 100 people to your workforce for new vertical businesses and to replace vacant positions. But you also see revenue growth, led by the lending business, where Mobikwik has 5-6 banking partners and NBFCs. It disbursed ₹8,000-9,000 crore of loans in FY23 so far, a significant jump from ₹1,500 crore in FY22.
Currently, about 55 percent of revenue comes from payments. The remainder comes from the high-margin financial services distribution business, whose share rose from 25 percent in fiscal 22 and is expected to grow to more than 50 percent in coming years.
Mobikwik has a user base of over 4 million merchants and 135 million customers, and has evolved into a multi-product platform offering digital lending, insurance, gold investment, and mutual funds. The focus is now on customer engagement, user loyalty, product cross-selling, and merchant business growth.
Having positioned itself as a retail-oriented platform, Mobikwik believes that its strength lies in volumes rather than the number of transactions, where it provides low-cost loans through a variety of channels such as PoS or BNPL.
“Today, not many platforms can claim to have 4 million active customers using credit products. While the amount in terms of payouts might be higher for some players, the absolute number of customers would be lower,” Taku said.
With Taku hoping to turn things around and grow the sustainability of the business, MobiKwik’s revamped strategy may help them find their footing again. But these positives remain jaded by the long slump that is seared into our minds. Can Mobikwik fix the bug?
