Decoding One MobiKwik IPO: Is It a Smart Investment?

Introduction

The fintech sector is rapidly gaining momentum, and One MobiKwik Systems Limited is on the brink of its IPO, aiming to pique yet another investor’s interest. This article seeks to unravel the intricacies of the One MobiKwik IPO by looking into the company’s background, IPO details, and whether it qualifies to be an investment worth investing in. With that, we assemble in the digital finance sphere to find out if the IPO will be a worthy investment option.

Company Overview

One MobiKwik, incorporated in 2009, is one of the leaders in the online payment industry, providing services including mobile recharge, buy now, pay later (BNPL), and digital wallets. With nearly 101.34 million registered users and 3.4 million merchant partners as of March 2021, MobiKwik has positioned itself as a leader in P2P payments, UPI-based services, and BNPL solutions like Zaakpay and Simpl.

Key IPO details

Following the halting of its IPO plans in 2022, MobiKwik has revived the proposal by issuing new shares worth ₹700 crore. The IPO includes a smaller offer size than the original ₹1,900 crore target set in 2021. Significantly, existing shareholders’ decision to hold on to their shares suggests that they believe in MobiKwik’s ability to secure future earnings.

The draft papers of MobiKwik also point towards the chances of a 'pre-IPO placement’ where additional securities are placed into general courses, systematically altering the size and measure of the new issue. This IPO involves a book-building process, wherein 75% of the issue is available for qualified institutional buyers, 15% is meant for non-institutional investors and 10% for retail individual bidders.

Utilisation of IPO proceeds

The budget that MobiKwik receives after its IPO is representative of where this company’s management sees itself going in business terms. Close to ₹250 crore is set aside for funding growth in the financial services business, while ₹135 crore will be spent on payment services. Another crore is earmarked to provide for data know-how. Lastly, ₹125 million will be spent on investments in machine learning and artificial intelligence. The sum of ₹70.28 crore is allocated for capital expenditure in the payment devices business, and the rest is reserved for general-purpose expenditures.

Pros and cons of investing in One MobiKwik's IPO

Pros

• Diversified Business Portfolio: One MobiKwik has already developed a diversified business, and the company offers mobile recharge, BNPL-type services, and wallet facilities. With this variety of diversification, the company is not only giving a product to a huge base of users but is also doing well in providing competition in the fintech industry.

• Strategic Fund Allocation: The idea behind the allocation of money that comes from an IPO also stems from a strategic mindset. MobiKwik shows that it is committed to improving its core competencies, staying ahead of industry changes, and securing its market position by setting aside sizable sums for growth in financial services, payment services, and technological developments.

• Market Confidence: The fact that existing shareholders who were controlling the business did not sell their shares is a positive vote of confidence in MobiKwik’s future potential. This can instil trust among potential investors, indicating that those closely associated with the company believe in its ability to deliver sustained growth and profitability.

• Adaptability: Considering the fact that the company is flexible in its perception of venture size depending on market conditions, one could note an adaptive approach. With such flexibility, MobiKwik can understand how or which financial strategy to adapt from one situation to another depending on changing circumstances and therefore coordinate its financial strategies effectively within the dynamic fintech space.

Cons

• Reduced IPO Size: One of the weaknesses that may be observed is the decision to lower the IPO size from ₹1,900 crore to ₹700 crore, which may indicate possible obstacles or uncertainties. Investors will be keen to find the reasoning behind this reduction to understand how the company intends to achieve its enhanced growth within many years.

• Regulatory Risks: The fintech sector is subject to evolving regulatory frameworks. Regulatory changes regarding digital payments and financial services may affect how MobiKwik does business. Thus, in order to evaluate regulatory risks related to compliance changes, investors should closely monitor regulatory developments.

• Competitive Landscape: The fintech industry is a competitive field on its own, where existing players and new entrants fight for market share. However, one of its major challenges is to stand out and remain ahead in a rapidly changing scenario where consumer preferences and technological advancements play important roles.

• Market Conditions: The fact that the earlier 2021 IPO draft was withdrawn due to weak market conditions also has implications for MobiKwik, considering how external economic factors have an impact on their performance. Investors must thoroughly study the present market and identify the risk factors that could affect the success of the IPO.

Strategic Considerations

One of the significant factors that investors should also consider with great care in the MobiKwik IPO is the firm’s strategic positioning, given the transforming fintech scene. Rescaling the IPO is considered an instrumental move; this resonates with a balanced approach, upholding pace and adjustment. The lack of an offer-for-sale aspect further highlights the commitment to a new issue in shares, focusing on growth and creativity rather than immediate liquidity demands.

Further, IPO proceeds were deployed in a well-calculated move towards the maturity of various segments that include financial services and payment solutions, technology improvement, and capital expenditure to strengthen MobiKwik’s market footing. Investors must pay close attention not only to how these strategic manoeuvres propel the company but also to how they relate to broad industry macro trends, regulatory evolution, and whether the companies are actually positioned well enough to capitalise on existing opportunities. The strategic foresight of MobiKwik regarding the IPO structure and in allocating funds would be vitally important to its development as a competitive strategy within an increasingly dynamic fintech generation.

Conclusion

Concluding, the One MobiKwik IPO marks a milestone in its journey and emerges as an attractive investment opportunity. The reduced size of the IPO and specific allocation of funds demonstrate strategic intent. On the other hand, investors should act cautiously, considering that any investment in a fintech business has its own risks.

With the digital payment industry continuing to change, MobiKwik’s agility will become a crucial factor influencing its future performance. With caution, the IPO could make MobiKwik a trailblazer in determining the path of digital finance. Once again, responsible investment choices should be underpinned by a sound knowledge of the company’s fundamentals and an acute sensitivity to market dynamics.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their own research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.

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