Digital payments company Mobikwik has filed a Draft Red Herring Prospectus (DRHP) with the market regulator Securities & Exchange Board of India (SEBI) for its initial public offering (IPO) worth Rs 1,900 crore.
According to draft documents, the issue comprises a primary share sale worth Rs 1,500 crore and Rs 400-crore secondary sales, where existing investors will divest their stake.
In the offer document, the company has listed various risk factors, including internal, external and risks related to the offer and equity shares.
Here are the key risk factors Mobikwik has indicated in its DRHP:
“The continuing impact of the COVID-19 pandemic, or any future pandemic or widespread public health emergency could materially and adversely impact our business and operations and it may be significant and continue to have an adverse effect on our business, operations and our future financial performance,” Mobikwik stated in the draft document.
The company said its business, financial condition and future prospects would be materially and adversely affected if it is unable to attract new users or merchants and retain and grow its relationships with existing users or merchants.
Security breaches and attacks against the platform could damage the reputation of the company, it added.
The company also faces substantial and intense competition in the fintech industry. The credit risk from (Buy Now Pay Later) BNPL business, and “any failure to maintain, protect and enhance our brand and reputation” were among other internal risk factors.
Mobikwik said it has a history of losses, including in fiscals 2019, 2020 and 2021.
“In the event our loss continues to increase, especially if we continue to grow at an accelerated rate, we may be unable to achieve profitability for the foreseeable future and it may adversely affect our business and financial condition,” it added.
Further, failure to deal effectively with fraudulent transactions, illegal activities and negative user experiences would harm the business, and could severely diminish merchant and user confidence in and use of the company’s platform.
Possible irregularities in managing records and compliances with the RBI, business interruptions or systems failures, outstanding litigation proceedings, the possibility of not being able to cross-sell insurtech and wealthtech products are other key risk factors.
“We have not obtained credit ratings and may not be able to access capital to finance our operations and future growth of our business, which could have a material adverse effect on our business, results of operations, financial condition, cash flows, and future prospects,” Mobikwik said.
The company noted that it has issued equity shares during the preceding 12 months at a price that may be below the offer price.
Meanwhile, external risks include political, economic or other factors that are beyond its control and may have an adverse effect on our business and results of operations.
“If there is any change in laws or regulations, including taxation laws, or their interpretation, such changes may significantly affect our financial statements,” the company said.
A slowdown in economic growth in India could cause its business to suffer, it added saying that “financial instability in other countries may cause increased volatility in Indian financial markets.”
Inability to raise foreign capital due to changes in domestic laws and risks linked to the rise in inflation were also among the key risks mentioned by the company.