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How MobiKwik aims to break even at Rs 480 cr with Rs 20-insurance policies

MobiKwik plans to raise $50 million from an investor before its IPO.The company expects revenue to reach Rs 480 crore in the 12 months ending next March

Ameya Karve & John Xavier | Bloomberg 

IPOs

Loans of as little as $30 and life insurance policies for as low as thirty cents a month: that’s what an Indian digital-payment company wagers will double its revenue and help it break even this year.

In its 10 years of existence, One System Pvt. has expanded from online payments into financial products including insurance, gold and mutual funds. The company, which plans an initial public offering in the next two years, sees its diverse offerings as key to growth in the still nascent industry.

“The number of digitally paying users in India is still not more than 180 million or hardly about 10% of the population,” Upasana Taku, co-founder and chief operating officer, said in an interview in Mumbai last month. “There’s still a huge opportunity to tap.”

India’s overall retail credit demand is poised to grow 60% to Rs 53 trillion ($771 billion) over the next four years, according to data from the Digital Lenders Association of India. The need for quick approval of small loans is high in a country where per-capita income is about $1,800.

Growing demand

plans to raise $50 million from an investor before its IPO, Taku said, declining to be more specific. The company counts Sequoia Capital, American Express and Cisco Investments among its marquee investors. It says it handles over a million transactions per day, with loans granted to half a million of its 107 million users so far, and sales of nearly 3,000 insurance policies daily.

The company expects revenue to reach Rs 480 crore in the 12 months ending next March, up from Rs 180 crore a year earlier, Taku said. While the consumer payments business is still likely to account for about 60% of the total, financial products are seen contributing as much as a fifth in the first full year since the business was launched. A bill-payment platform makes up the rest.

MobiKwik expects to break even at the earnings before interest, taxes, depreciation, and amortization level this year, as it has lowered customer incentives amid strong demand. MobiKwik offers personal loans of Rs 2,000-100,000 at interest rates of 20-28% over three to 12 months. The company sells Rs 100,000 life insurance polices for a monthly premium of 20 rupees.

Major player

The industry is “fiercely competitive,” with MobiKwik being one the prime players along with Alibaba-backed Paytm, Flipkart’s PhonePe and Amazon Pay, analyst Pranav Bhavsar wrote in an April note on Smartkarma. It’s also unclear how much can be achieved through diversification.

“Even as firms providing digital transaction services aim to acquire more and more customers and data to start with, it needs to be seen what is the end game for them,” said Jigar Shah, head of research at Maybank Kim Eng Securities India Pvt. in Mumbai. “Will they eventually turn themselves into banks rather than being providers?“

MobiKwik sees the numbers adding up. “Our target is almost 40% of those Indians who make $1,000 to $5,000 annually and no financial products are reaching them because of difficulties in distributing them,” Taku said.

First Published: Sun, July 07 2019. 13:49 IST
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