A litmus test for fintech IPOs as MobiKwik inches closer to listing

After Paytm's disappointing performance after listing in 2021, the markets have evolved and the fintech ecosystem has matured with greater regulatory clarity from the RBI

The financial technology (fintech) space is set for a major initial public offering (IPO), nearly three years after another significant player in the ecosystem, Paytm, listed on the bourses.

 

Nearly three years after it initially planned its listing, MobiKwik has revised its IPO size, with plans to raise Rs 700 crore this year.

 

The fintech company’s listing would be a litmus test for other firms in the space, after Paytm initially performed disappointingly. In 2021, Paytm debuted on the exchanges at a 9 per cent discount to the issue price of Rs 2,150.

 

However, the markets have evolved since then, and the fintech ecosystem has matured with greater regulatory clarity from India’s banking regulator, the Reserve Bank of India (RBI).

 

“Paytm’s challenge came with its valuations, and eventually, the company could not prove its path to profitability for the longest time. While it was an early mover in fintech, it listed when markets presented a bull market opportunity, but without profitability,” an industry analyst said, requesting anonymity.

 

However, MobiKwik’s listing comes at a time when the company has posted a profitable financial year—a benchmark that analysts tracking the industry have stressed for a long time.

 

In the financial year 2021 (FY21), MobiKwik’s revenue from operations stood at Rs 288.5 crore, with a loss of Rs 111.3 crore, according to its draft red herring prospectus (DRHP) filed in January. In contrast, the fintech earned Rs 890.32 crore in revenue from operations and posted a profit of Rs 14.08 crore in FY24.

 

“There was only one major fintech player who listed before MobiKwik. Whether the stock price rises or falls, challenges with management and licence embargoes have meant others will need to prove themselves in this IPO litmus test,” a founder of another fintech company said.

 

In a previous interaction with Business Standard, Upasana Taku, co-founder and chief financial officer (CFO) of MobiKwik, said 2024 was a “realistic market” compared to the “bubbly valuations” of 2021.

 

“2021 was a super bull market with bubbly valuations and a lot of froth. We came at the end of the year, also following another fintech listing that crashed. 2024 is a better time as it’s a realistic market appreciating growth and profitability,” she had said.

 

Investors noted they would look for reassurance in the absence of regulatory overhangs, a sound compliance structure, and stable business lines that fintechs can operate before investing in new-age firms.

 

“Promoters in MobiKwik will continue to hold a significant share in the company even after listing, showing they have substantial skin in the game. The first benchmark for analysts and investors was profitability, which they have achieved,” an investor added, requesting anonymity.

 

However, investors cautioned that going forward, the benchmarks for new-age IPOs will tighten as companies expand their operations.

 

“Compliance is now directly linked to business continuity. This makes it the most important item on a business checklist. Without it, market success would remain uncertain,” another investor added.