Mobikwik’s Stellar Stock Market Debut, Shares Soar 58%, Valuation Tops ₹3,870 Crore

One Mobikwik Systems, the operator of the digital payment platform Mobikwik, witnessed an impressive debut on the stock market on Wednesday. The company’s shares opened 58.6% higher than their initial public offering (IPO) issue price and surged up to 88% during early trading.

The shares were listed at ₹442.25 on the Bombay Stock Exchange (BSE), compared to the IPO price of ₹279, and at ₹440 on the National Stock Exchange (NSE), reflecting a 57.7% increase.

By 11 a.m., the shares were trading at ₹516.45 on the BSE, after touching an intraday high of ₹524, taking the company’s market capitalization to over ₹4,000 crore.

Mobikwik initially aimed to raise ₹700 crore in January as per its draft prospectus filed with the market regulator. However, the issue size was later revised to ₹572 crore. The IPO attracted overwhelming interest, with bids amounting to nearly 120 times the issue size.

Strong Demand Across Investor Categories

Retail investors bid for 134 times the portion reserved for them, while non-institutional investors and institutional investors subscribed 108 times and 119.5 times their respective quotas, according to data from the BSE.

Prior to the IPO, Mobikwik secured ₹257.4 crore through an anchor placement, with participation from 21 investors. This included 10 domestic funds, which collectively invested ₹137.4 crore.

The company’s institutional shareholders include Peak XV Partners, the Abu Dhabi Investment Authority, and American Express. Notably, none of these investors chose to offload their holdings during the IPO.

A Strategic Shift in Valuation and Size

This IPO marks Mobikwik’s third attempt to go public. The company reduced the size of its offering and significantly lowered its valuation to attract investors. In 2021, Mobikwik was valued at $921 million in the private market; this figure has now been revised to approximately $250 million.

For FY24, Mobikwik reported an operating revenue of ₹875 crore, a year-on-year increase of 62%.

What Worked in Mobikwik’s Favor?

The pricing strategy appears to have been a critical factor in the IPO’s success. With a price band of ₹265–₹279, the shares were perceived as attractively valued. Additionally, strong activity in the grey market, where shares were trading at around ₹825 in late September, likely fueled optimism for a significant listing gain.

Mobikwik’s diverse focus areas, including mobile wallets, Unified Payments Interface (UPI), consumer credit, and merchant payments, have also positioned it as a comprehensive financial services provider. The company’s adaptability and focus on sustainable growth have resonated with investors, ensuring a robust market debut.

Business Challenges Ahead for Mobikwik

While Mobikwik has successfully structured its IPO and timed its market debut to great effect, the company now faces significant business challenges that will shape its future trajectory.

Mobikwik’s credit operations, centered around its buy-now-pay-later product Mobikwik Zip and unsecured consumer loans via Zip EMI, face increasing regulatory oversight. These offerings rely heavily on partnerships with banks and non-banking financial companies (NBFCs) for loan underwriting. However, with traditional financial institutions scaling back their collaborations, the sustainability and growth of this segment remain uncertain.

Slowdown in Peer-to-Peer Lending

]The peer-to-peer (P2P) lending sector, once a promising avenue for Mobikwik, has been significantly disrupted by regulatory changes. Earlier this year, the Reserve Bank of India imposed restrictions that have nearly stalled the P2P lending market. Mobikwik Xtra, powered by Lendbox (an NBFC-P2P), faced considerable backlash from users on social media following modifications to its investment policies.

Challenges in the Payments Segment

Mobikwik’s core payments business is also struggling with multiple challenges –

UPI Market Share: Mobikwik holds only a marginal 1% share of UPI transactions, a space dominated by larger players.

Mobile Wallet Decline: The popularity of mobile wallets is waning as consumers increasingly opt for UPI Lite, which offers more seamless transactions over traditional wallet top-ups.

Merchant Payments: In its merchant payments vertical, Zaakpay, the company had to reapply for a payment aggregator license. Although it has received in-principle approval from the Reserve Bank of India, the delay highlights regulatory complexities in this segment.

Outlook

While Mobikwik has demonstrated its ability to adapt and manage the challenges in the past, the evolving regulatory environment and shifting consumer preferences pose significant hurdles. Addressing these issues will be critical for the company to maintain its growth momentum and build long-term resilience.