It's better to bring it at a price we can justify for everyone: Mobikwik CEO on IPO valuation

Mobikwik's approach to its IPO valuation is grounded in careful consideration of market dynamics and future growth potential, according to co-founder and CEO Bipin Singh.

The issue of valuation cuts has gained attention, especially following reports that Mobikwik reduced its appeal by 70% compared to its last private round in 2021. Acknowledging this adjustment, Mobikwik’s CEO explained that the decision was made to ensure a more stable and justifiable pricing.

Speaking about the price band set for the offering, Mobikwik's CEO emphasised the importance of aligning the IPO price with the company's long-term vision and the need to maintain investor confidence. "Some reports suggest that Mobikwik has cut its valuation by 70%. That was the last private round valuation we did in 2021. So, when you look at the numbers from that point of view, it's better to bring it at a price where we can justify it for everyone."

He clarified that this adjustment makes the valuation more realistic and in line with current market expectations.

The CEO acknowledged the delicate balance between setting a price that makes sense for both the company and its potential investors. "I will not say high or low. That's a matter of how you look at it, but you can see how and where we raised money in the last private round three years ago compared to the valuation at which we are bringing it now," he added, highlighting the rationale behind the final price band.

Mobikwik cuts IPO size from Rs 1,900 cr to Rs 572 cr; founder Bipin Singh explains why

The Gurugram-based fintech firm has filed its Red Herring Prospectus (RHP) with the Securities and Exchange Board of India (SEBI) to raise Rs 572 crore through a fresh issue of equity shares. This marks the third time the company has downsized its IPO offering.

At the set price band, the company is currently valued at Rs 1,660 crore (around $197 million).

With an infusion of Rs 572 crore from the fresh proceeds post IPO, its valuation will rise to Rs 2,190 crore ($264 million) --a significant 70% drop from its peak valuation of over Rs 6,930 crore ($924 million) in 2021.

The IPO will be open for subscription from December 11 to December 13, with a price band ranging from Rs 265 to Rs 279 per share. SBI Capital Markets and DAM Capital Advisors are acting as the book-running managers for the offering.

The allocation for the IPO is structured as 75% for Qualified Institutional Buyers (QIBs), 15% for Non-Institutional Investors (NIIs), and 10% for retail investors.

In justifying its pricing strategy, Mobikwik’s leadership pointed to peer comparisons and future growth potential. The company aims to avoid the pitfalls faced by competitors like Paytm, whose stock saw a significant decline post-IPO.

"The management took a conscious call that at this valuation, it would be more prudent from a dilution point of view, to keep it restricted. Even if you look at the peer comparison and where they are valued versus us, significantly you will see the comparison. That was primarily the reason to keep the issue size in check, and thereafter, let the performance deliver in the future and then assess the course of action going forward," said Anand Kumar, Corp Dev, Strategy and Investor Relations.

The CEO also noted that Mobikwik’s IPO proceeds will be directed towards growth capital, with no shares being sold by the promoters or investors. "As promoters in this particular IPO process, we are not selling any shares because we believe that the company will do far better, and that is why the issue proceeds are going towards growth capital," he added.

During the first quarter of the current fiscal year (Q1 FY25), MobiKwik reported revenue of Rs 342.2 crore, with a marginal loss of Rs 6.6 crore for the period.  In FY24, the company achieved  62 percent year-on-year revenue growth at Rs 875 crore and closed the fiscal with a profit of Rs 14 crore.

Financial product distribution bet 

Post-IPO, Mobikwik is banking on its financial products distribution strategy to further diversify its revenue streams. Co-founder Upasana Taku shared that the company is actively expanding its suite of financial services, including insurance products, for which Mobikwik has already secured an insurance distribution license. Additionally, the platform will offer investment products like gold, direct mutual funds, and fixed deposits.

While Taku did not specify exact launch dates, she assured that Mobikwik plans to broaden its offerings in the coming years. "We will bring more and more products," she said, referring to the platform’s future expansion.

She also clarified that Mobikwik's focus remains on aggregating and distributing financial products, rather than pursuing a banking license or becoming an NBFC. "Our focus is more on distribution, rather than creating a balance sheet or becoming a bank ourselves," Taku emphasized.

To support its growing financial product portfolio, Mobikwik has already partnered with various deposit-taking NBFCs and financial institutions, including Bajaj Finance, Mahindra, Unity Small Finance Bank, and Suryoday Small Finance Bank, to offer fixed deposit services.