One Mobikwik Systems IPO Analysis 2024: Should You Subscribe?

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One Mobikwik Systems Ltd (MobiKwik) launched its initial public offering (IPO) on December 11, 2024, with bidding set to close on December 13. The IPO, carrying a grey market premium (GMP) of 49%, received a solid response on the first day.

However, investors should get a clear understanding of both potential rewards and risks before subscribing. This IPO analysis provides a comprehensive review to help make an informed decision.

MobiKwik IPO Details

  • Issue Details: Mainstream
  • Issue Size: Rs 572 crore
  • Fresh Issue: Rs 572 crore
  • Price Band: Rs 265 – Rs 279
  • Lot size: 53 shares
  • Listing Date: December 18, 2024

MobiKwik IPO Subscription Status

The MobiKwik IPO kicked off with a strong response, recording an overall subscription of 7.66 times as of 5 p.m. on the opening day. Retail investors led the surge, oversubscribing their allotted shares by an impressive 27.97 times, while non-institutional investors followed with a solid 9.38 times. Qualified institutional buyers (QIBs), however, are yet to make their mark, with subscriptions at 0.02 times so far.

Overview of MobiKwik

MobiKwik operates as a platform business with a two-sided payments network, connecting consumers and merchants. As of June 30, 2024, it has onboarded 161.03 million registered users and empowered 4.26 million merchants to facilitate online and offline payments.

MobiKwik operates across two main verticals: payment services and financial services. The platform's value for both new and existing users grows as it introduces innovative products across its digital credit, investments, and insurance segments. To boost revenue, MobiKwik aims to venture into investments and insurance, striving to become a comprehensive financial services provider.

MobiKwik Key Strengths

  • Improving Financials: MobiKwik has delivered robust growth, with operational revenue rising at a CAGR of 29% between FY22 and FY24. The EBITDA margin improved significantly from -25% to 3% in the same period. The company achieved a remarkable turnaround, moving from a loss of Rs 83.81 crore in FY23 to a profit of Rs 14.08 crore in FY24.
  • Market Leadership in Wallet Services: Starting as a digital wallet platform for recharges, top-ups, and utility payments, MobiKwik has emerged as the largest wallet player by Gross Merchandise Value (GMV). However, it ranks third in registered wallet users, following Paytm Payments Bank and PhonePe.
  • Strong GMV Growth: MobiKwik’s Payment GMV grew at an annual rate of 45.88%, while MobiKwik ZIP GMV (disbursements) saw an exceptional annual growth rate of 112% from FY22 to FY24.

MobiKwik Risk Factors

  • Intense Competition: MobiKwik operates in India’s highly competitive fintech sector, facing rivals across multiple segments. Its core payment business is under pressure due to increasing competition and commoditization, resulting in a sharp decline in take rates.
  • Declining Core Payment Business: The performance of MobiKwik’s core payment segment has been weakening, with a 14% CAGR decline from FY22 to FY24. However, growth in the financial services segment, which posted a 139% CAGR during the same period, has offset this decline.
  • Regulatory Risks: Any tightening of regulations or new fintech norms introduced by the RBI could significantly impact MobiKwik’s operations and growth prospects.

Conclusion: Should You Subscribe to MobiKwik IPO?

MobiKwik has shown solid growth in recent years, achieving profitability in FY24. The company’s shift toward higher-margin financial services, backed by its existing payment user base, is a key driver. However, it lags competitors like PhonePe and Paytm in user base and service diversity.

The digital payments market in India is projected to grow fivefold in five years, fuelled by increased smartphone use and merchant network growth. Despite these prospects, challenges such as slim margins, fierce competition, and the dominance of UPI pose risks to MobiKwik’s market position. The firm’s success hinges on scaling its financial services, enhancing transaction volumes, and expanding into rural areas. 

The MobiKwik IPO, carrying a grey market premium (GMP) of 49%, presents both opportunities and risks. The substantial GMP suggests a strong debut on the stock exchanges, making this IPO attractive for potential listing gains. Long-term investors, however, should approach with caution, paying close attention to the growth in the company’s financial services business and competitive positioning.

For a deep dive into other IPOs, explore: IPO Corner on Liquide