Mobikwik is sticking with the Default Loss Guarantee (DLG) model, more commonly referred to as FLDG, even as larger fintech peers like Paytm have opted out of the structure amid regulatory heat. The Gurugram-based fintech, which facilitates personal loans through its Zip EMI product, said it has not faced resistance from lenders and continues to offer FLDG across most partnerships.
“I don't believe that there is any problem with banks or NBFCs willing to work in the DLG/FLDG model with fintechs,” executive director, co-founder and CFO Upasana Taku said during the Q1 FY26 investor call. “In fact, that is the predominant model, and that is the model that RBI has also very nicely documented now in the guidelines.”
Mobikwik disclosed that it offers a 3-5 percent FLDG in most of its lending contracts. “Roughly, you can say about 5 percent of [credit AUM] has been given as FLDG,” said Komal Sharan, Head - Finance, Corporate Development and Investor Relations. She added that invocation rates remain “minimal” and that credit quality is improving.
This statement comes at a time when some fintechs, including Paytm, have exited the FLDG-backed lending model, citing regulatory scrutiny and margin compression. In contrast, Mobikwik said it operates both models, including FLDG-backed loans where it shares the risk, and distribution-only partnerships where it simply generates loan leads for partners.
Paytm walks away from DLG: Why fintech major is ditching guarantees in lending for good
Taku added that the company uses both models strategically. “We are not facing any challenges in disbursing under the DLG model,” she said. “But we are also doing the lead-gen model on cards as well as personal loans… and we are very happy to book the lead-gen fee in that case.”
How FLDG accounting works
Under the FLDG model, Mobikwik provides a guarantee for a small percentage of loan disbursals to cover defaults. This helps convince lenders to extend credit but also has implications for Mobikwik's profit and loss statement.
“When you're in an FLDG model, larger part of your cost knocks off in your P&L upfront, because you’re given that guarantee. So that goes upfront, but the revenue you’re recognizing is over the life of the loan,” Sharan explained. “In a way, both models equal out.”
Taku added that Mobikwik is well-capitalised to support this model. “We have raised IPO proceeds for providing FLDG guarantee. It was also a regulatory directive and good prudent [practice],” she said.
MobiKwik revenue drops 20% YoY in Q1FY26, loss surge over 6X at Rs 41.9 crore
Loan growth rebounds, margins expected to normalise
Mobikwik's total Zip EMI loan disbursals stood at Rs 693 crore in Q1 FY26, up 31 percent quarter-on-quarter, according to the investor presentation. Taku said the company is now seeing a recovery after a difficult period.
“This quarter, we have shown 30 percent growth in disbursal... We expect the recovery to be even stronger in the coming quarters,” she said.
The take rate from financial services was 8.4 percent in Q1, while the net margin from Zip EMI stood at 4–5 percent, the management said. Gross revenue from lending, including interest income and processing fees, typically stands at 10–12 percent, while credit costs are around 6–7 percent and operational expenses (underwriting, collections) add another 2 percent.
“We expect that by September... we will get back to the 40 percent margin as far as the lending business is concerned,” Sharan said. “That will also have an impact on the overall company EBITDA.”
EBITDA break-even targeted by end of FY26
Mobikwik is aiming to break even on EBITDA terms in second half of this fiscal year. “We are quite confident that in this financial year (FY26), either in Q3 or Q4, we should be able to break even and then work towards building a far more profitable growth engine in the next financial year,” Taku said.
She explained that Mobikwik saw a Rs 15 crore improvement in EBITDA in Q1 versus Q4, bringing it to Rs -31.2 crore. “Mathematically, if we are able to achieve a similar swing of Rs 15 crore, then in about two quarters, we should break even,” she said.
Mobikwik reported a net loss of Rs 41.9 crore in Q1 FY26, higher than the Rs 6.6 crore loss a year ago, but narrower than the Rs 56 crore loss in Q4 FY25.
Payments engine strong, UPI mix weighs on take rates
Mobikwik’s payments GMV rose to Rs 38,388 crore in Q1 FY26, up 53 percent year-on-year. While UPI now contributes 35 percent of this GMV, the shift has impacted take rates. “Our processing margins are at about 15 basis points, which is actually industry-leading,” Sharan said.
Payment take rate stood at 0.56 percent in Q1, down from 0.68 percent a year ago. However, gross margin on payments hit a record Rs 59.4 crore, up from Rs 50.5 crore in Q4, helped by a 57 percent drop in user incentives and 27 percent cut in payment gateway costs.
Mobikwik is also awaiting regulatory clearance for pocket UPI monetisation. “It would be an additional upside lever both to take rates and overall revenues,” Sharan said.
As of June 30, 2025, the company held Rs 475 crore in cash and reduced its working capital debt from Rs 46 crore to Rs 32 crore.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
