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    MobiKwik IPO: Fintech company may defer plan amid weak investor sentiment, concerns on biz model

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    MobiKwik IPO: Fintech company may defer plan amid weak investor sentiment, concerns on biz model

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    The company was initially expected to launch IPO in November. MobiKwik's proposed IPO consists of Rs 1,500 crore fresh issue and Rs 400 crore offer on sale (OFS).

    Gurugram-based fintech start-up Mobikwik may defer its plans to go public by a few months amid concerns about investors’ interest and skepticism about its business model following the regulator’s digital lending paper, multiple people aware of the matter confirmed to CNBC-TV18.
    Mobikwik, a smaller rival to firms like Paytm, had filed its papers for a Rs 1,900 crore initial public offering (IPO) in July. This included a fresh issue of Rs 1,500 crores and an offer for sale (OFS) for another Rs 400 crores. Market regulator SEBI had subsequently approved the IPO plans on October 7.
    “The plan was first to hit the markets around Diwali, and then it (Mobikwik) also wanted to wait for the response to Paytm. Now it is unlikely to go ahead before January-February. It all depends on the markets now because timing has to be right,” said a person involved directly in the matter on the condition of anonymity.
    Another investment banker to the company said that while plans were delayed, it could not be predicted when the markets would turn favourable for Mobikwik to be able to launch its IPO. This person added that the firm may be able to go to markets in December if investor response is good, if not, then the plans may be further delayed.
    Paytm’s disappointing listing and continued underperformance since played a key role in the decision to defer the IPO plans, said one of the people quoted earlier.
    MobiKwik’s unlisted stock was exchanging at around Rs 1,350 before the launch of Paytm’s IPO. Since then, the unlisted share price has fallen to about Rs 900, almost 33 percent lower, as per reports.
    CNBC-TV18 reached out to Mobikwik co-founder Bipin Preet Singh on Monday, November 22, relating this development, but Singh declined to comment, while the other co-founder Upasna Taku did not respond to calls.
    In an emailed response to CNBC-TV18’s story, a spokesperson for Mobikwik said, “MobiKwik has a unique DNA – it was bootstrapped for the first 4 years and has achieved its current scale of 101 million users (as of March 2021) having spent only $100 million since inception. The company is focused on Buy Now Pay Later (BNPL) for daily life payments and has the largest number of pre-approved BNPL users in India at 22.3 million (as of March 2021). It has always adopted a sustainable growth strategy. The company is witnessing strong business growth, has a clear path to profitability and will list at the right time.”
    The Morning Context (TMC) had also reported on November 15 that two investors who’d committed to investing in MobiKwik’s public issue had pulled out due to concerns about the firm’s ability to compete and grow in the crowded fintech space. The Morning Context had named Eastspring Investments and Nomura as the two key investors who had pulled out. CNBC-TV18 could not independently verify this information.
    In the last round of funding, Mobikwik had raised about $20 million from Abu Dhabi Investment Authority (ADIA) in June of this year, commanding a valuation of about USD 750 million. The fintech was subsequently seeking a valuation of over a billion dollars in its IPO, according to people in the know. Given the current concerns, the investors- both domestic and foreign- would unlikely back this kind of a valuation, said one of the people quoted earlier.
    As per people in the know, another factor that may dampen investor sentiment are the draft regulations surrounding digital lending that were released by the Reserve Bank of India last week.
    RBI’s working group recommended that “to prevent loan origination by unregulated entities, REs (regulated entities) should not be allowed to extend any arrangement involving a synthetic structure, such as, the FLDG (First Loss Default Guarantee) to such entities. REs should not allow their balance sheets to be used by unregulated entities in any form to assume credit risk.”
    Mobikwik’s business, as one of the top Buy Now Pay Later players in the country, relies heavily on this FLDG model and may be hurt by these rules. This in turn could impact investor demand for its public offer.
    Mobikwik is one of the largest mobile wallets (MobiKwik Wallet) and Buy Now Pay Later (BNPL) players in India based on mobile wallet GMV and BNPL GMV, respectively, in Fiscal 2021, its DRHP said. In March, reports suggest that data of nearly 110 million users of MobiKwik was leaked on the dark web for sale by hackers. The dataset included details of KYC documents, Aadhaar cards, credit card details, mobile phone numbers linked to MobiKwik wallet, etc. The company, however, had denied any leak subsequently. Subsequent reports in October also suggested that this alleged data breach of 3.5 million users at MobiKwik is currently under RBI's scanner.
    As per its DRHP, the fintech posted losses of Rs 111.3 crore as of FY21, Rs 99 crore as of FY20 and Rs 147.9 crore as of FY19.
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