Mobikwik IPO analysis

Mobikwik IPO (initial public offering) will open for subscription on December 11, 2024, and close on December 13, 2024. We break down the payment platform's strengths, weaknesses, and growth prospects to help investors make an informed decision. Mobikwik IPO in a nutshell Quality : Between FY22 and FY24, the company reported a three-year average ROE and ROCE of around -32 and -18 per cent, respectively. Growth : Between FY22 and FY24, its revenue grew by 29 per cent per annum. It turned profitable in FY24 for the first time before reporting losses again in Q1 FY25. Valuation : At the upper end of the price band, the stock is valued at a P/E and a P/B ratio of nearly 155 and 3 times, respectively. Overview: Mobikwik is a digital payment and lending platform that is expected to benefit from India's growing digital payment landscape and adoption of quick loans. Increased unsecured lending through the BNPL (Buy Now Pay Later) model and credit cards will help the company scale up its business. However, competition in this segment from other established players will be a challenge. About Mobikwik One MobiKwik Systems (Mobikwik) is among India's leading digital payments and financial services companies. Its core offerings include digital payments, lending services, and insurance distribution, with a particular focus on its flagship BNPL product MobiKwik ZIP. Its share of total revenue from financial services leaped from 18 per cent in FY22 to over 60 per cent in FY24. The company is also actively diversifying its product portfolio, venturing into investments, mutual funds, and gold savings products, thereby catering to a broader spectrum of financial needs. Strengths of Mobikwik Strong brand: The significant growth of Mobikwik's assets under administration (AUA) to Rs 6,693 crore (as of June 30, 2024) from Rs 324 crore in FY22 reflects the brand's popularity among consumers. Nearly 90 per cent of Mobikwik ZIP users in Q1 FY25 were repeat customers. Weaknesses of Mobikwik Rising costs : Operating in a highly competitive industry, the company has witnessed a significant rise in customer acquisition costs that have risen from Rs 18 in FY22 to Rs 34 in Q1 FY25. As the company is yet to report steady profitability, the escalating costs pressure its margins. Mobikwik IPO details Total IPO size (Rs cr) 572 Offer for sale (Rs cr) - Fresh issue (Rs cr) 572 Price band (Rs) 265-279 Subscription dates December 11-13, 2024 Purpose of issue To fund organic growth, R&D expense and capex for payment device business Post-IPO M-cap (Rs cr) 2,167.4 Net worth (Rs cr) 730.6 Promoter holding () 25.2 Price/earnings ratio (P/E) 154.8 Price/book ratio (P/B) 3.0 Financial history Key financials (Rs Cr) 2Y pa(%) FY24 FY23 FY22 Revenue 28.9 875 539 527